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Imagine you showed up to work one day and were told that in the New Year, you would make one-fourth less than the year before. Sounds like a nightmare, right?
For the majority of US-based physicians, this scenario isn’t just a reality but a threat they’ve faced for over a decade. The government-run Centers for Medicare and Medicaid Services (CMS), the country’s largest health insurance payer whose reimbursement rates set the industry standard, estimates that it will have to reduce physician payments by 24.4% in 2014. This reimbursement cut is not a whim, but instead an obligation to something called the Sustainable Growth Rate (SGR).
The SGR is derived from a complicated formula that was established by the Balanced Budget Act of 1997 to tie government healthcare spending to changes in economic growth. The SGR sets an annual limit for how much the government should spend on healthcare. In order to maintain appropriate spending levels, if the government surpasses that limit in a given year, physician reimbursement needs to be cut by a counterbalancing percentage in the subsequent year. Likewise, if the government spends less money than the rate dictates, physician payments can be increased.
At first glance, the SGR seems reasonable enough. However, a complex web of issues caused big increases in health spending that far outpaced economic growth—the Baby Boomer generation’s size and longevity, the rise of utilization rates due to conditions like diabetes and cancer, and inefficient delivery of services. In 2002, when doctors faced their first SGR reimbursement cut, Congress passed legislation to avoid the payment reduction. This began a 10-year, $150 billion habit of “kicking the can” on the issue, a time during which overspending on healthcare occurred most years without cuts (sometimes even increases) to physician reimbursement.
Whether you are a doctor or not, it’s no surprise that overspending in healthcare has become a serious issue. You may have heard policymakers on both sides of the aisle endorse a shift from the current healthcare system that rewards volume—Fee-For-Service (FFS)—to one that incentivizes improved quality and outcomes.
While many public and private initiatives are underway to begin this transformation, such as quality measurement programs and the use of health IT, the underlying SGR issue has the healthcare system trapped in a vicious cycle. Most provider organizations have called for a full repeal of the SGR to alleviate the tremendous strain experienced by providers from constant financial uncertainty.
What’s more, as the nation faces yet another threat of the “fiscal cliff,” controlling healthcare costs is more important than ever. The budget conference committee, established as part of the deal that reopened the government earlier this fall, must come to an agreement on federal spending levels by December 15. Congress must also decide how to appropriate those funds by January 15, 2014, the date on which year two of sequestration is set to take effect. All of these important decisions must be made by February 7, 2014, roughly the date past which the United States surpasses its debt limit.
On December 12, the Senate Finance Committee will mark up a bill to fully repeal the SGR, freeze physician payments until 2023, and move forward with a payment system oriented around quality measurement, outcomes improvement, and overall value. The majority of work done on this issue will happen in early 2014, but the Senate Finance Committee’s markup and work done by the House Ways and Means Committee represent critical progress and momentum in Congress towards a long-term solution. Additionally, a bipartisan letter in support of SGR repeal, signed by 259 members of Congress, indicates the full extent of support from Democrats and Republicans alike. However, the rubber will meet the road when funds are allocated out of the budget to offset the $139 billion to repeal the SGR.
Are you optimistic or doubtful? How do you think physicians should be reimbursed?
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