Legislative Update: August 2011

Legislative Update: August 2011

By Mike Watson, TSCL Legislative Assistant

The Senior Citizens League (TSCL) often hears from seniors who report that their doctors are no longer accepting Medicare patients.  The situation stems from a payment formula, more than a decade old, that’s leading to ongoing uncertainty for doctors.

Every year we hear about congressional action on the infamous “doc-fix.”  The “doc-fix” refers to legislation to prevent or delay scheduled payment cuts as required by law to physicians who treat Medicare patients.  Although physician payments are funded through December 31st of this year, physicians face a pay cut of 29.4% in 2012. These cuts are the result of a payment formula, which is supposed to keep Medicare Part B spending at a certain target level.

Since Medicare was created in 1965, the amount that Medicare has paid physicians for providing services to beneficiaries has gone through many adjustments.  The formula currently used to calculate payments dates back to 1997, when the Balanced Budget Act handed down the physician payment formula known as the sustainable growth rate (SGR).  The SGR formula is supposed to calculate, and set, an overall spending target for Medicare Part B.  If spending falls under the target, SGR mandates increases in reimbursements to physicians so that spending meets the set target.  If spending falls above the target, SGR requires cuts in payments to physicians.

The formula was primarily enacted as a way to control Medicare’s spending while policymakers hoped it would maintain beneficiaries' access to medical services.  Unfortunately, medical spending and costs have risen far more rapidly than anticipated in the time since SGR has been implemented.  After 2002, when doctors faced their first cut in pay—as mandated by the SGR formula—Congress has acted to prevent the cuts to protect seniors’ access to physicians.  At first, the cuts were relatively small, but as time has gone on and Congress has put off the cuts, their size has grown.

Many doctors have reported that they will likely stop treating Medicare patients if the 2012 cuts go into effect.  In fact, a recent survey by the American Medical Association found that 17% of doctors are restricting the number of Medicare patients in their practice with the constant threat of payment cuts commonly cited as a reason.

While our political and medical systems have been “plagued” with the SGR formula for the past 14 years, the question remains; have we learned from the problems of the SGR?  Given recent policy enactments and debates, the answer may be a resounding “no.”

The health care reform law, enacted last year, called for steep cuts in future reimbursements to hospitals, home health agencies and others based on another formula.  Many, including the Actuaries for Medicare and the Congressional Budget Office, have questioned the sustainability of these cuts.  In addition, much of the current debate over the best ways to tackle Medicare spending seems to be based around using such formulas and capping healthcare spending, although the current physician formula clearly does not work.  TSCL hopes that a real solution to the problems in Medicare—rather than another SGR formula–can be found.