Medicare and fairness: Will a new healthcare reform bill address the SGR formula?

December 1, 2009
Bob Gatty

Bob Gatty is a former congressional aide, covers Washington for a number of business and professional publications.

It has become increasingly likely that even if Congress approves some form of healthcare reform this year or early next, it will not include significant reform of the formula on which physician Medicare payments are calculated, which is disappointing news for dermatologists and every physician who serves Medicare patients.

Key Points

If that expectation becomes reality, physicians will be faced with their annual battle to convince Congress to sidetrack mounting pay cuts resulting from the Sustainable Growth Rate formula (SGR), which, unless addressed in some form this month, will force an average 21.2 percent fee cut in 2010 and additional estimated reductions of about 2 percent annually over the next several years.

Late in October, Sen. Debbie Stabenow (D-Mich.) introduced the Medicare Physician Fairness Act (S 1776), which would have abandoned the current pay formula and set future annual payment updates at zero, a revision estimated to cost about $245 billion over 10 years. The bill would have repealed SGR, eliminating its accumulated spending target debt, which triggers the annual negative Medicare payment updates.

But Stabenow's bill was derailed in the Senate before it could reach a final vote. "I don't know of a single person who wants to see reimbursement cuts to doctors who treat Medicare patients, but if Congress is going to step in and prevent it, we shouldn't do it by racking up more debt on the government's credit card," argued Senate Minority Leader Mitch McConnell (R-Ky.).

In early November, as the House of Representatives prepared for what was narrow approval, 220-215, of its version of health reform, Reps. John Dingell (D-Mich.), Henry Waxman (D-Calif.) and other key Democrats introduced the Medicare Physician Payment Reform Act of 2009 (HR 3961), which would restructure the SGR with the objective of providing a long-term remedy.

The bill, which the Congressional Budget Office (CBO) estimated would cost $210 billion over 10 years, would make these key changes:

According to the CBO, the changes would increase Medicare fees to physicians by about $195 billion over 10 years and result in higher spending for both Medicare Advantage and the Department of Defense's TRICARE program, estimated to total $64 billion over the 10-year period.

The plan would be offset by about $49 billion in Medicare Part B premium increases beginning in 2011.

While Congressional leaders separated the Medicare physician payment reform issue from the broader health reform initiative in an effort to keep the total cost under $1 trillion over 10 years, budget-conscious lawmakers weren't buying.

Sen. Charles Grassley (R-Iowa) said Stabenow's bill "undermines the president's commitment to making sure healthcare reform won't add a dime to the deficit when one of the most expensive problems in the Medicare program is removed from overall reform legislation."

House Speaker Nancy Pelosi (D-Calif.) also said she could support an SGR fix this year only if offsets are included to cover the cost. That will be difficult, considering the deep cuts in Medicare that were already included in the House-passed bill to help pay for overall reform.

While those budget concerns appear to make it unlikely that a permanent fix will be approved, almost certainly not as part of healthcare reform legislation, it is possible that a less costly, temporary solution will be found. For example, Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, proposed replacing this year's cuts with 0.5 percent pay increases for two years at a cost of $25 billion.

If that, or a similar, "solution" is reached - offsets may be required for that, as well - physicians serving Medicare patients will once again be faced with making annual appeals to Congress seeking relief, beginning in 2012, when the projected cut will be even deeper.

Once again, it appears that Congress is preparing to kick this can down the road.

Bob Gatty, former congressional aide, covers Washington for businesses specializing in healthcare and related issues. Contact him at bob@gattyedits.com

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