Continually a barrier to future planning, the annual threat of cuts to Medicare reimbursement in the range of 25% to 30% may be on the way out.
Most people would agree that the sustainable growth rate formula—which is used by the Centers for Medicare & Medicaid Services (CMS) to determine provider reimbursement rates for services provided to Medicare beneficiaries—is fundamentally flawed. Because the formula is designed to ensure that the annual increase in the expense per Medicare beneficiary does not exceed gross domestic product growth, when healthcare spending outpaces spending in other sectors of the economy the conversion factor kicks in to bring the following year’s reimbursement back in line. For 2014, the conversion factor would result in a 25% reduction in payment for providers. The threat of such a significant reduction in reimbursement leaves physicians unable to plan for future investments in technology, staff, and equipment. Historically, Congress has stepped in at the last minute each year to avoid such enormous cuts (ie, the “doc fix”), but this year congressional action is not guaranteed.
The ongoing problem with fixing the SGR is the cost. In recent years, the expected cost to fix the Medicare reimbursement system has grown, making legislation to correct the formula less politically palatable. This year, however, the SGR may finally be eliminated.
In February, in its annual report on the federal budget and economy, the Congressional Budget Office (CBO) drastically reduced the estimated cost to repeal the SGR formula from $245 billion to less than $140 billion over 10 years—a relative bargain in congressional terms. The score reduction can be attributed to a slowing of Medicare spending in relation to historical trends and an expected decline in the growth of future spending for physician services. The lower score—in combination with the steady drumbeat of support from the Association of Community Cancer Centers (ACCC) and other stakeholders—prompted Congress to take action. The House Energy and Commerce Committee has been working with the House Committee on Ways and Means to develop legislation to replace the SGR formula. On July 31, the House Energy and Commerce Committee voted unanimously in favor of a bill that would do just that.
The Medicare Patient Access and Quality Improvement Act of 2013 (HR 2810) eliminates the current SGR formula and replaces it with a 2-phase approach to physician reimbursement. Phase 1 stabilizes reimbursement with a 0.5% update to the Medicare fee schedule conversion factor annually for 5 years. Starting in 2019, phase 2 begins with 0.5% updates to the conversion factor. In phase 2, these updates could be positive or negative, depending on the ability of an individual provider or group of providers to reach predetermined quality measures or clinical improvement activities.
While this is certainly a step toward solving the problem, HR 2810 is not the full solution. First, HR 2810 does not replenish the pool of available funds with savings realized annually by CMS. The bill requires CMS to identify the services it overpays and reduce those payments by 1% each year from 2016 to 2018. However, the bill contains no language calling for CMS to redirect that money back into services it designates as undervalued. Without this direction, it could mean that the total payment pool would be smaller and planned reimbursement increases might never materialize.
Second, the CBO has reduced the expected total cost to replace the SGR, and not eliminated it entirely. There has yet to be a mechanism identified to “pay for” such a repeal, and many in Congress believe that offsets will not be identified anytime soon.
Third, even if budget offsets are identified and agreed to by Congress—a tall order, no doubt—HR 2810, as written, is expected to cost significantly more than the CBO scored earlier this year. In fact, some estimates peg the SGR legislation to cost about 40% more than the current CBO score. Because of this, the CBO is revisiting the issue and a new score is expected this fall.
In the meantime, HR 2810 awaits a full floor vote with 40 bipartisan cosponsors. The ACCC continues to work with legislators to help ensure that the legislation passed will appropriately reimburse physician services.