Legislative Update: September 2012

Legislative Update: September 2012

Rx for Medicare's Doctors' Pay Formula

By: Jessie Gibbons, Legislative Analyst

Year after year, physicians who treat Medicare patients are threatened with scheduled pay cuts that Members of Congress consistently override.  While doctors, patients, and lawmakers have grown accustomed to the "doc fix," the ritual has grown unpleasant for all involved.  Doctors are fed up with the looming pay cuts, patients are losing access to their trusted physicians, and lawmakers are tired of the political sparring that occurs each time a pay patch is needed.

Members of Congress on both sides of the aisle agree that the current payment formula – the sustainable growth rate (SGR) – is fundamentally flawed.  TSCL was disappointed when the Affordable Care Act did not address the issue in 2010, but many believe that the lame-duck session following the November election will provide a prime opportunity for Congress to finally repeal the faulty formula.  The replacement options are numerous, however, and many of them are contentious.  Just three months away, it still remains unclear which solution lawmakers could agree upon.

One option recently recommended by the Medicare Payment Advisory Commission (MedPAC) would repeal the SGR and encourage physicians to join two-sided risk accountable care organizations (ACOs).  Doctors participating in ACOs voluntarily group with hospitals and other providers to lower costs and better coordinate care.  Pilot ACOs that are currently operating only see rewards for delivering high-quality, low-cost care.  Those in two-sided risk ACOs, however, would also be penalized for providing low-quality, high-cost care.  According to MedPAC, substantial savings would result, but many are still skeptical about the potential of ACOs.

Private insurance executive Peter Edwards, at a recent roundtable with the Senate Finance Committee, presented another option.  Edwards, who is the President of Provider Development at Humana, suggested a flexible arrangement that offers a variety of payment models for differing practices and geographic regions.  He advised the Senate Committee against a one-size-fits-all approach, warning that such approaches would undermine any existing collaborations.

A third option was introduced by Senator Rand Paul (KY) in June.  His plan would repeal the SGR and base payments on the same formula that is used to calculate cost-of-living adjustments for Social Security benefits.  It would cap annual pay increases for providers at three percent, allowing physicians to practice without the threat of annual reimbursement cuts.

A number of innovative alternatives to the SGR exist – those outlined above are three among more than a dozen.  Because the options are so varied, TSCL believes that testing and evaluating different models will be a critical step in the process.  A bill recently introduced by Rep. Allyson Schwartz (PA-13) – the Medicare Physician Payment Innovation Act – would do just that, and we look forward to partnering with her in the coming months to resolve the physician payment fiasco once and for all.