MedPAC recommends scrapping SGR, associations fight back
While the Medicare Payment Advisory Commission’s (MedPAC’s) overall goal to scrap the government’s sustainable growth rate (SGR) formula is commendable, most say the commission is going about it the wrong way and have asked MedPAC to rethink its proposal. A MedPAC solution, proposal in September, was recommended by members in a 15-2 vote Oct. 6; however, most say the plan needs reworking, particularly because the proposal to overturn SGR is laced with long-term freezes and cuts to physician payments.

“We have to do something about rising costs and we have to do something to get rid of the SGR because it is a mushrooming nightmare,” Jack Lewin, MD, CEO of the American College of Cardiology (ACC), said in an interview. "But this [MedPAC] solution is not a good one.

“To create an 18 percent reimbursement cut for specialists over the next three years is just going to drive people out of the program and it really doesn't solve the problem with primary care doctors either," Lewin noted. "Their reimbursements are flat in this program.”

The current SGR formula, which could take effect as early as January 1, calls for a 30 percent cut to 2012 fee-schedule services, a hefty loss for both hospitals and private practices alike. However, MedPAC noted that repealing the SGR would have high budgetary costs—upwards of $300 billion.

Lewin offered that Congress will most likely “kick the can down the road one way or the other,” and put off the cuts for at least one to two years to look for better solutions to reduce costs and incentivize care.

The MedPAC solution does not do anything for this, Lewin said. “You have to also take a look backward. Over the last decade, Medicare reimbursements have basically dropped in real dollars by more than 40 percent,” he said.

Office costs and business costs for both specialists and primary care physicians have been rising almost 3 percent per year. “Every year doctors have been living through cuts that are bigger than this entire SGR issue [the possible 29.5 percent cut],” Lewin said.

“What has happened in cardiology is that practices have been forced to close and now cardiologists are employed by hospitals,” Lewin said. “If that is what we want to do across the entire profession—destroy private practice—this is the way to do it.”

MedPAC’s proposal has recommended payment rate freezes for primary care and reducing fee schedule’s conversion factors for services other than primary care, which could control the cost of the SGR repeal, according to MedPAC. Additionally, MedPAC has proposed nearly $333 billion in provider payment cuts and beneficiary cost increases.

Forty-two specialty groups wrote a biting letter to MedPAC, urging the commission to rethink its proposal. “We share your concern that the SGR is undermining patient and physician confidence in the Medicare program and appreciate the Commission’s effort to present a comprehensive plan intended to improve the prospects for SGR repeal,” the letter read. “Unfortunately, however, we cannot support this plan in its present form because it retains many of the SGR’s flaws, undermines physicians' ability to participate in payment and delivery reforms and calls for payment rates that the Commission itself has previously said could reduce Medicare beneficiaries’ access to medical care.”

According to the letter, MedPAC’s proposal would apply a 10-year freeze to payments for primary care services, which account for nearly 8 percent of Medicare spending. The associations said that the services that comprise the remaining 92 percent of Medicare expenditures would be cut 17 percent over the first three years of the proposal and then remain frozen for the remaining seven.

Within the letter, the associations urged MedPAC to consider a broader set of proposals to pay for SGR repeal. “MedPAC could and should tell Congress to rely on these existing proposals rather than offering up a new package that magnifies the size of provider and beneficiary sacrifices due to the limited scope of items within the commission’s purview,” according to the letter.

During the commission’s Sept. 15-16 meeting, staff projections showed that even despite the 17 percent cut proposed, Medicare revenues to physicians over the next 10 years would increase from $64 billion to $121 billion, due to increased volume. However, the associations said that “there is simply no real basis for this assumption … Even if expenditures per patient did go up at the projected rate, it cannot be presumed that net incomes and physicians’ ability to cover their cost of practice will increase accordingly.”

The associations are worried that under the plan, both specialists and PCPs will not have the operating margin necessary to provide innovative, quality-based care.

“We support taking the next year or two to identify ways to reduce unnecessary Medicare spending across all specialties to slow the cost curve and reduce $20-$30 billion in spending per year, which is a way to ultimately eliminate the SGR-related debt over time and move toward a better healthcare system,” Lewin said.

Additionally, Lewin offered that he and the association would like to see better coordination of care between PCPs and specialists. “We would like to see rewards for people who are moving us toward better outcomes, better quality and better performance,” Lewin said.

“This is a bad formula and this is a bad solution to fix it, though I think that MedPAC's intentions are very good,” Lewin concluded.

The 42 associations said that while they appreciate the desire of the commission to repeal the SGR, they would like to work together with the commission to develop an alternate proposal that would create access to care and encourage payment reform.