MedPAC Could Tweak Recommendations In Line With New Scores for SGR Repeal

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By Mindy Yochelson  


With new lower estimates for repealing the sustainable growth rate (SGR) formula that controls Medicare physician payments, the Medicare Payment Advisory Commission could alter the recommendations it made previously to Congress for transitioning the payment system, MedPAC's executive director told a Senate committee May 14.

“Given that the cost of repeal has decreased, the 10-year path of legislated updates described in our October 2011 letter could be revised,” Mark E. Miller told the Senate Finance Committee.

Although MedPAC still holds to the basic precepts of the plan it approved 17 months ago, the latest estimate for the cost of SGR repeal could allow for some leeway on the numbers, he indicated during the hearing, “Advancing Reform: Medicare Physicians Payments.”

In October 2011, MedPAC voted to recommend that Congress scrap the SGR and pay for the repeal through cuts in pay to specialists and other providers. The 10-year recommendation would freeze payment levels for primary care doctors over the decade but would cut specialists and other Part B providers by 5.9 percent for the first three years, followed by a freeze (195 HCDR, 10/7/11).

CBO's Estimate

The Congressional Budget Office in February lowered the 10-year SGR repeal estimate to $138 billion (26 HCDR, 2/7/13). On May 14, CBO released updated budget projections on repealing the SGR with a price tag of $139.1 billion for a zero update (see related article).

However, at the time of MedPAC's recommendation, the estimate was $300 billion over 10 years.

Instead of the 5.9 percent reduction for specialists over three years, “our preliminary estimate is that each of those reductions could now be 3 percent or less,” according to Miller, one of three witnesses at the hearing.

“This estimate assumes that primary care fees are held constant throughout the 10-year period and that one-third of the fiscal burden of repeal is borne by physicians and other health professionals paid under the fee schedule,” Miller added.

Physicians are scheduled to receive a 25 percent cut in Medicare payments on Jan. 1, 2014.

As part of a bipartisan move to change the physician payment system while the cost to do so is lower than it has been recently, Finance Committee Chairman Max Baucus (D-Mont.) and ranking member Orrin G. Hatch (R-Utah) May 10 wrote to health providers asking for advice on crafting a new system (92 HCDR, 5/13/13).

“Our letter asks for specific suggestions,” Baucus said at the hearing. In addition to repealing SGR, “we also must change the underlying fee-for-service system that Medicare uses to pay physicians,” since this system is responsible for promoting volume over value, he said.

However, since new replacement models being developed by the Centers for Medicare & Medicaid Services' Center for Medicare and Medicaid Innovation “are not ready to replace the fee-for-service system,” Baucus said, improvements are needed for the current FFS system. Services need to be valued appropriately; methods need to be developed to reduce unnecessary services; and physicians need pathways to transition to alternative payment models, he said.

In their opening statements, both Baucus and Hatch mentioned the “window of opportunity” for passage of legislation.

“We know from previous years that the CBO score has a tendency to fluctuate,” Hatch said. “If we fail to act, we run the risk of causing a physician shortage in the Medicare program that has broad impact for beneficiaries.”

Care Coordination Payment

“To facilitate providers' transition to alternatives to fee-for-service payments,” another witness, Kavita K. Patel, a fellow at the Brookings Institution, recommended merging CMS's various incentive payment programs into a “care coordination payment.”

Patel, a managing director at the Engelberg Center for Health Reform, said there are many initiatives that physicians participate in to promote higher quality.

She mentioned the physician quality reporting system; the electronic health record meaningful use measures; electronic prescribing; and the value-based modifier. The Affordable Care Act directed CMS to establish a value modifier to adjust Medicare payments to all physicians by 2017 on the basis of the quality and cost of care provided.

In the short term, to help physicians transition to a new system, these programs could be harmonized in a way that would allow providers to satisfy requirements “from these pieces” and receive a larger care coordination payment, she said.

Controls on Spending

The third witness, consultant Bruce Steinwald, said when he was director of the Government Accountability Office's health care team, he opposed repealing the SGR without putting substitute controls in place.

“I believe the post-SGR world should be one of decreasing reliance on fee-for-service payment but with effective controls in place to ensure that value, not volume, is rewarded by the Medicare fee schedule,” he said.

Once the SGR is repealed, Medicare data could be used “to make distinctions between high-value and low-value care” given by providers, he said.

This could be accomplished through such methods as profiling physicians' utilization patterns and providing feedback when utilization appears excessive.

Other methods could track those used by the private sector, such as mandating prior authorization for expensive diagnostic procedures or tiering beneficiary copayments according to the value of a service, he said.

By Mindy Yochelson  

More information on the hearing is at