It’s done. Congress on April 14 passed and the president signed into law a bill that terminates one of the most egregious and silliest examples of dysfunctional government in recent years—the so-called “sustainable growth rate” (SGR) formula for doctors’ fees under Medicare.
First, a round of applause for bipartisan agreement—however obvious it was that had to happen in this case. The vote in the house was 392-37. In the Senate, it was 92-8.
Praise is also in order for enacting two more years of funding for the Children’s Health Insurance Program and $7.2 billion in new funding over two years for community health centers, a program that was expanded under the Affordable Care Act and serves low-income families. There’s also welcome help for low-income Medicare beneficiaries and rural hospitals.
But the main thrust of the law is to kill one (failed) program that adjusted doctors’ fees under Medicare and create a new and hopefully better one.
The U.S. Senate has an opportunity next week to hammer the final nail in the coffin of the failed “sustainable growth rate” (SGR) formula for Medicare physician payment. At the same time, it can move the U.S. closer to a system that pays doctors for the quality of care they deliver, not the quantity.
Bear in mind that Medicare pays about a third of the tab each year for all physician services in the U.S.
For those who have not been following this issue (and I don’t blame you, it’s convoluted, even tortuous), here’s a quick recap:
The House in a rare bipartisan vote (392-37) voted on Thursday, March 26 to repeal the SGR formula, which has been in place since 1998. The formula, part of the Balanced Budget Act of 1997, was intended to constrain Medicare spending by pegging annual physician fee updates to a target based on the growth in overall physician spending and the gross domestic product.
The formula never worked. I’ll spare you the details on that. Suffice is to say that the disparities between the growth in physician costs and GDP over the period 2002-2013 were such that reducing physician fees each year by the amount the formula dictated were—well, let’s just say they were very politically distasteful. Continue reading…
If you blinked on Thursday, you might’ve missed the House passing the latest Medicare’doc fix’ (see here for its 30-seconds of deliberation).
After posting the bill in the wee hours of Wednesday morning, House leaders faced opposition over its stop-gap approach and some of the cuts employed to offset the cost of the bill. With some arm-twisting, they managed to suppress objections for the handful of seconds necessary to hammer the gavel and call it done.
The Senate is due to take the bill up Monday evening, and it is highly likely to pass (this time it should actually get a vote). Since it is about to become the law of the land, let’s take a look at what’s inside. There’s a little slice of fun in here for everyone.
First and, theoretically, foremost, the bill blocks the pending cuts to doctors under the long-broken Sustainable Growth Rate (SGR) formula. It would maintain existing physician pay rates for another twelve months, through March 31, 2015.
Not coincidentally, a vote to raise the debt limit will likely come due again at about that time.
Second, the bill continues, for a comparable period, the package of so-called Medicare extenders: a hodge podge of policies that boost payments in rural areas, suspend caps on certain benefits and other otherwise sunsetting policies that each have their niche constituencies. Many of these items have been reauthorized by Congress for over 15 years.
Third, the bill includes some new policies that put out fires of their own, or effectuate high priority programs for well-placed Members of Congress. These include:
An additional six month extension of the Two Midnights Rule, which drew a bright line distinction between presumptive inpatient and outpatient hospital stays but has created significant confusion and objections among many hospitals;
A one-year delay of ICD-10 implementation, to October 1, 2015 (this is the second time Congress has acted to delay ICD-10);
Elimination of the ACA cap on deductibles for employer-sponsored health plans; and
Two provisions aiming to improve mental health services, including the Excellence in Mental Health Act that, among other things, improves funding for community mental health centers.
Woah, some of you are saying. Dial back to that 2nd bullet. While the transition to ICD-10 has been controversial since it was first proposed in 2005, just last month CMS Administrator Tavenner said there would be no more delays (last year, the Administration voluntarily delayed the program from 2013 to 2014).
Healthcare providers have been battening down the hatches and preparing for this colossal transition from ICD-9 and its 14,000 codes to ICD-10 and its 69,000. Word on the street is that the provision was included primarily to earn cred with specialty physician groups, whose support for the bill was in question for concern about other provisions (see the bullet re: misvalued – aka overvalued – codes below).
Turns out, the specialty doc associations by and large opposed the bill anyway, and the healthcare sector is now left grappling with this unexpected turn.
In light of Thursday’s bicameral, bipartisan release of a Medicare physician payment policy to permanently replace the Sustainable Growth Rate (SGR) formula – an achievement to be celebrated in its own right – some are seeing momentum toward passage of such a deal before the current doc fix expires on March 31.
But the scope of what the committees issued Thursday represents as much of a step back as a step forward, at least relative to their aspirations and timeline for accomplishing them.
Once the appointment of Senator Baucus to be Ambassador to China was announced, the committees agreed to make it “as far as they could” toward a comprehensive SGR replacement policy prior to his confirmation, including identifying offsets to pay for the $125-150 billion (over 10 years) bill. For those who missed it, Senator Baucus was confirmed on Thursday.
Only in the past week did the key committees acknowledge that achieving agreement on offsets by this deadline was unattainable, but finalization of the so-called “extenders,” a hodge podge of Medicare payment plus-ups and other polices perennially included with the doc fix, was still the goal.
(Recall that the Senate Finance Committee passed an SGR replacement bill with extenders in December, but their House counterparts have yet to do so.)
In negotiations on that extenders element, House Republican leads reportedly would not agree to include beneficiary-oriented policies, such as funding for outreach to Medicare enrollees regarding low-income subsidy programs and for Family-to-Family Health Information Centers.
While some Democrats involved in the talks may have been inclined to make this concession, others sharply objected, scuttling a deal on this front and demonstrating the difficulty of compromise on this relatively non-controversial topic.
Furthermore, and has always been the assumption, identifying offsets for the package continues to be an exponentially heavier lift than any other aspect of the process. On that front, the key camps have outlined their broad parameters for what they might accept.
House Republican leads desire and likely require meaningful cuts to ACA-related spending as well as a substantial balance of Medicare beneficiary-impacting cuts, such as those relating to premiums and coinsurance.
The Sustainable Growth Rate mechanism creating a zero-sum game for Medicare Part B reimbursement rates (dropping rates as volume picks up) has long been unsustainable, and so Congress has been messing around with short-term SGR fix legislation for years now. Every six to twelve months we’ve been hearing about the impending 20% or 30% Medicare pay cut about to hit physicians’ pocketbooks, and the likely exit of physicians from the rolls of participating providers.
However, the stars are now aligned in such a way that real progress seems likely: multiple powerful Congressional committees have signed off on a deal to replace the SGR rule with something more workable: A unified approach to financial incentives to physicians and other medical professionals who are Medicare participating providers intended to promote quality and enrollment in alternative payment arrrangements.
One of the sticking points involved in fixing this problem is that the price tag for a permanent SGR fix has long been seen as too high. How do we know the price? and How high is too high? you may ask. Well, Congress looks at CBO projections of the cost of implementing legislation over a ten-year planning horizon. When physician cost trends are on a steep increasing slope, that ten-year budget number looks bigger. When the trends flatten out a bit, the big number gets smaller. At present, that ten-year cost projection is “only” $125 billion, and Congress has spent over $150 billion on short-term fixes. So the time is right.
Partisan gridlock in Washington regarding health policy has been so pervasive and bitter that any bipartisan co-operation on any important health issue should be applauded by a frustrated public.
That is why the emerging bipartisan compromise regarding the fifteen-year long policy embarrassment known as the Sustainable Growth Rate (SGR) problem needs to be taken seriously.
Remarkably similar solutions — a new hybrid physician “value-based” payment methodology — have emerged from three of the four key committees in Congress, and seemingly the only stumbling block is finding the $115-120 billion to pay for it.
Moreover, key physician interest groups, including the American Medical Association, appear to have signed off on this approach.
This makes it all the more troubling that the approach taken is unsound health policy that will damage practicing physicians in diverse settings: private practice, medical school practice plans, and hospital employment.
This is because the proposed legislation casts in concrete an almost laughably complex and expensive clinical record-keeping regime, while preserving the very volume-enhancing features of fee-for-service payment that caused the SGR problem in the first place. The cure is actually worse, and potentially more expensive, that the disease we have now.
The SGR fix would basically freeze or severely limit future physician fee updates for Medicare Part B (a serious problem for primary care), while permitting physicians to earn modest “value-based” bonuses if they can document quality measure attainment, cost reductions, participation in alternative payment schemes, practice enhancement activities, or meaningful use of EHRs.
Physicians who meet all these standards could expect to supplement their existing Part B fee by about 4 percent in 2016, going to 10 percent in 2020, with the aggregate bonuses subtracted from the pool of total Part B physician payments to preserve budget neutrality. Non-compliant physicians would see corresponding reductions in their updates.
There are sensible opt-outs for physicians who can report in groups, virtual or real, as well as for physicians who participate in as yet unspecified “advanced payment models” (APMs). Continue reading…
Congress just had an uncharacteristically big week – with significant implications for healthcare policy. It flew by fast and furious, so here we pause to unpack the most significant developments and what they teach us about the future.
1. The Permanent Doc Fix Effort is Real. You have to hand it to the committees of jurisdiction, they have kept their heads down and plugged away all year at permanently repealing the broken Sustainable Growth Rate (SGR) formula that dictates Medicare payments to doctors. They’ve floated new payment methodologies, added policy addressing the package of “extenders” that perennially travels with the “doc fix,” and now all three have successfully completed bipartisan mark-ups of their respective approaches. Furthermore, the three month SGR patch that was included in the budget deal is an implicit endorsement by congressional leadership that there’s actually a chance this could happen in the first quarter of next year.
The next step is to identify savings to pay the roughly $150 billion price tag, which has always of course been the biggest rub. That process is going to take center stage early next year in a “Super Committee-lite” process of negotiating various potential cuts to healthcare programs. The cynics are still betting against it, but we’re closer than we’ve ever been before to replacing the 15+ year-old SGR.
2. The Long-Term Care Hospital Sector Will Never be the Same. In a lesser-noticed component of the three month doc fix patch alluded to above, Congress eliminated the payment differential for LTCHs (pronounced el taks) and regular inpatient hospitals for patients who do not meet clinical complexity criteria. What began as an esoteric exemption for a small handful of hospitals in the early 1980’s and grew to a $6 billion Medicare benefit annually is now going to start to plateau.
The market liked the change, paradoxically, because it was gentler than some bean counters had recommended and gave plenty of time (four years) for sophisticated companies to adjust. But the hot LTCH business just got some pretty cold water poured on it.
3. The Budget Deal Helps Healthcare Programs. The Murray-Ryan agreement to set spending levels for the next two years alleviated some of the impact of the sequester on discretionary spending programs like those at the FDA, NIH and HRSA. This means that funding for new product approvals, clinical research, workforce development programs and some primary care services will be modestly improved in 2014 and 2015.
With his announcement on Nov. 14 of a plan to offer a temporary reprieve to people facing cancellation of their health-care policies, President Barack Obama may have created his own version of the much-maligned, often yearly, Medicare “doc fix”.
The doc fix, a recurring effort by Congress to override statutory formulas that limit the growth in Medicare payments to doctors, often sparks political theatrics as lawmakers work to assuage the concerns of physician groups and Medicare recipients. Many members of Congress want to repeal and replace the underlying program — the sustainable growth rate formula for reimbursing physicians — but agreement has proved elusive, in part because of deficit concerns and the high cost of repealing the formula.
The president may have set himself up for another situation similar to the doc fix with his proposal to administratively tweak the health law. Obama said he will temporarily allow health insurance companies and state insurance commissioners to continue offering insurance plans “that would otherwise be terminated or canceled” for failing to meet the requirements of the Affordable Care Act (ACA).
Has President Obama created his own version of the annual “doc fix” by continuing insurance plans that would have otherwise been canceled?
While this change will help some health-insurance consumers, it is a serious complication for health insurers who in a few weeks will have to readjust their plans. In the 24 hours since the announcement, the initial reaction from insurers and state health insurance commissioners has been mixed. Some insurers have already voiced concerns that any short-term fix will deprive their ACA-compliant exchange plans of the healthier customers needed to keep rates down for everyone, including older, sicker customers.
Fast-forward 11 months to late October, 2014, with the midterm elections imminent and the president’s “transitional policy” about to expire. Will Democrats want the issue of whether people can “keep their health plan if they like it” raising its ugly head again, just as voters are about to cast their ballots?
The new “fiscal cliff” legislation hailed by some as a “one-year doc fix” of the scheduled 26.5% sustainable growth rate (SGR) cut that was scheduled to take effect on 1 January 2013, has passed the Senate and House as part of the American Taxpayer Relief Act ( HR 8 ) goes to President Obama for his likely signature.
But was this “one-year doc fix” really a fix?
Not at all.
In fact, once again Congress has failed to resolve the ever-present sustainable growth rate cuts that repetitively surface year after year by kicking the proverbial can down the road another year.
The cost of the one year patch will be $25.1 billion dollars over 10 years and will be paid for almost entirely by health care cuts in other areas.
Hospitals (increasingly doctor-employers now, remember?) will see audits of their billings increase as efforts to recoup some $10.5 billion of “overcoding” charges are seen as the largest source of revenue for the one-year “fix.”
Hospitals will also see an extension of lower Medicaid payments to hospitals that treat a high number of uninsured or low-income beneficiaries, known as “disproportionate share hospitals” to find savings of about $4.2 billion.
Another $4.9 billion offset will be applied to the lowered bundled payments given for patients with end-stage renal disease – some of the sickest people receiving services from Medicare.