MedPAC Approves Proposal to Repeal SGR

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In what could be the first step toward breaking a pattern of annual short-term fixes to the Sustainable Growth Rate (SGR) formula that governs Medicare payments, the Medicare Payment Advisory Commission (MedPAC) today voted to approve a proposal to repeal it.

The SGR was implemented in 1997 in a move to reduce annual federal healthcare spending by tying Medicare reimbursement for physicians to increases in the gross domestic product. However, congressional action, postponed the cut to physician reimbursement as mandated by the SGR formula,with the size of the cut growing with each postponement.

The next scheduled SGR rate adjustment, slated for January 2012, would implement a 30% cut in reimbursement under the Medicare Physician Fee Schedule. However, observers say preventing this cut permanently carries a high cost, with some pegging the price of a10-year freeze across all services at $300 billion.

MedPAC’s vote jibes with several recommendations it offered to CMS at a meeting on September 15. Such recommendations included breaking the formulaic link between annual updates and cumulative expenditures for fee-schedule services; replacing the SGR formula with a stable, predictable 10-year path of legislated fee-schedule updates; and eliminating the 30% cut that is pending for 2012.

During the meeting last month, MedPAC also advised CMS to balance the total cost of repeal and the need to ensure beneficiary access to care by sharing the cost of repealing the SGR across physicians, other health professionals, providers in other sectors, and beneficiaries

According to MedPAC's September proposal, a first tier of offsets for the SGR would be about $50 billion over 10 years and would consist of existing MedPAC recommendations. A second tier would comprise approximately $180 billion over 10 years in proposals from other sources. MedPAC has also recommended that a 2% annual payment hike per Medicare beneficiary be instituted for fee-schedule services.

While today's vote finalizing MedPAC's proposal was almost unanimous, Maurine Dennis, senior director for government and economic advocacy at the American College of Radiology (ACR), says at least one commissioner dissented. She characterizes the ACR as still “concerned” about MedPAC's recommendation to target specialists.

At the September meeting, MedPAC representatives noted that because access to primary care is at risk over the next decade and patients are more likely to encounter problems finding a new primary care physician than a specialist , reducing the schedule’s conversion factor for specialty services (in turn paving the way for increases in fee-schedule revenue, ensuring beneficiary access to care, and controlling the overall cost of SGR repeal) remains a key way to realign fee-schedule payments to support primary care.

"The ACR remains concerned about the idea of holding payment for primary care at current levels while slashing specialties," Dennis asserts. "Primary care is part of the rest of the house of medicine."