Year after year, because of Medicare’s flawed sustainable growth rate (SGR) formula, physicians face significant cuts in Medicare reimbursement. And time and time again, Congress intervenes with a short-term “fix” to prevent these steep cuts. In fact, Congress has employed 18 temporary fixes to override SGR pay cuts over the last 11 years. All these band-aid solutions inject continued uncertainty into our Medicare system and do nothing to ensure that our patients have timely access to medical care.
Let’s take a second to step back and understand how this madness started. The SGR was a provision of the Balanced Budget Act (BBA) of 1997. The SGR formula replaced something called the Medicare Volume Performance Standard (MVPS) and this formula, in part determines, how physicians are paid by Medicare. Under the SGR system, payments to physicians are updated annually based on whether or not physicians meet annual spending targets. To help rein in growth in Medicare expenditures, spending cannot exceed the rate of overall growth in the economy, as measured by the gross domestic product (GDP). If overall physician payments exceed target expenditures, then the SGR triggers an across-the-board reduction in payments to doctors. However, this only addresses a small part of the overall issue related to Medicare expenditure growth. Physician payments comprise a small and shrinking percentage of overall Medicare spending. Payments to doctors only account for approximately 12 percent of total Medicare expenditures — down from 14 percent in 2006. All other components of Medicare — e.g., hospitals, prescription drugs and nursing homes — are not subject to the SGR or similar expenditure targets.
Even though Congress has intervened with short-term legislative “patches” to avert the payment reduction, it’s important to note that these fixes have kept increases in physician payments well below inflation over time. Recent news reports would lead you to believe that doctors are “satisfied” with pay freezes, but that’s obviously not the case. Once inflation is factored in, all the patches really add up to cuts. To further compound the problem, the short-term fixes have also caused a huge difference between the actual level of Medicare spending and the target in the SGR formula.
The greatest concern related to the SGR is the challenge many seniors have getting timely access to care. Because physician payments have declined relative to inflation and the expense of running a medical practice, it is increasingly difficult for physician practices to remain financially viable. As a result, some practices have been forced to limit new Medicare patient referrals, or even stop participating in Medicare altogether. If impending cuts mandated by the SGR go through, it will be very difficult for many physicians to maintain their current level of participation in Medicare, further impeding patient access to care.
Last year, Congress, made significant progress toward a permanent repeal of Medicare’s SGR payment system. House and Senate leaders, representing three key congressional committees, spent countless hours to develop a compromise SGR reform bill. As it stands right now, the Congressional Budget Office (CBO) estimates that that the cost of the compromise SGR reform bill developed last year would be approximately $140 billion over 10 years. In contrast, the cumulative cost of the patches since 2003 is estimated at $169.5 billion. It’s time for the madness to stop! Given these numbers, it doesn’t take a genius to figure out that Congress has spent more on temporary patches than what it would cost to pay for a permanent SGR repeal bill.
Unless Congress acts, physicians face a 21 percent Medicare pay cut on April 1, 2015. America’s neurosurgeons, together with rest of the medical community, are urging Congress to continue the progress already made and once-and-for-all, replace the flawed SGR payment formula to preserve seniors’ access to care.
John A. Wilson, MD, is a neurosurgeon from Winston-Salem, NC and chairman of the AANS/CNS Washington Committee