The SGR Fix Passes With a 2.2% Update

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The familiar, contentious debate surrounding Medicare’s sustainable growth rate (SGR) formula came to a temporary close on June 24, when the House of Representatives, by passing HR 3962, finally agreed to a Senate plan to put off a 21.3% decrease in payment rates. The payment fix is only effective through November 30, however, ensuring yet another go-round of Congressional debate on the SGR this fall.

imageThe legislation, which President Obama signed into law on June 25, retroactively reverses the scheduled 21.3% payment cut and approves a 2.2% increase in physician payments.

The payment cut was originally scheduled to take effect earlier this year, but Congress passed several extensions to give lawmakers more time to agree on a plan to prevent the cut. The last extension ended June 1, and after holding off processing claims until June 18, CMS began paying claims incorporating the 21.3% reduction.

Next Steps

Now that the payment cut has temporarily been averted, CMS will automatically reprocess any claims that were submitted with charges greater than or equal to the approved 2.2% update. Physicians who submitted claims with charges less than the 2.2% update will need to contact their local Medicare contractors to request an adjustment.

CMS expected to begin paying claims with the 2.2% update beginning July 1, once contractors had time to update and test claims-processing systems.

Lawmakers, policymakers, physicians, and other industry stakeholders are disappointed that a permanent fix to the SGR was not enacted. Rep Henry Waxman (D–CA), chair of the House Energy and Commerce Committee, noted during the June 24 House debate that no one, after all was said and done, would be able to call the suspension measure a great bill. He added that asking for only a five-month extension of payments to physicians for the work that they do in caring for Medicare patients was an embarrassment.

According to President Obama, implementing the pay cut would have been unacceptable. He stated, during the signing ceremony for the extension, that continuing to postpone payment reductions is an inadequate solution to an untenable system, consisting of alternating cuts and temporary reversals, that has been in place for more than a decade.

The SGR was implemented in 1998, and since then, Congress has stepped in nine times to prevent a payment cut. Only once has a negative update taken effect, in 2002 (at 4.8%). Intended to control overall spending on physician services, the SGR sets a target for total physician payments in a given year. If spending falls below the target, the SGR is modified to increase payment rates. If spending exceeds the target, however, physicians’ fees are cut.

The recently enacted SGR fix will cost $6.4 billion, according to the Congressional Budget Office, and will be paid for largely through changes to pension and other provisions. During the House debate, Rep Michael Burgess, MD, (R–TX) stated that while it was highly unsatisfactory merely to patch the physician-payment system, failing to do so would have been unthinkable.

In a statement issued by the Medical Group Management Association on June 25, William F. Jessee, MD, president and CEO, noted that this latest patch expires in November, just one month before the start of the next fiscal year for many medical groups. This timing, he stated creates havoc in business planning for 2011, since the extension’s expiration is scheduled for precisely the time when physicians will have to make their Medicare-participation decisions for 2011.

Many senior citizens are already struggling to find physicians, according to Cecil B. Wilson, MD, AMA president. In a June 24 statement issued by the AMA, he estimated the number of Medicare patients having difficulty in finding a new primary-care physician at about one in four, and he stated that roughly one in five physicians limits acceptance of Medicare patients due to program’s payment instability and uncertainty.

Reactions From Health Care

The AMA surveyed 9,000 physicians in various specialties around the United States this spring to gauge the impact that the prolonged SGR debate had on physician practices and to identify actions that physicians took when the substantial 21.3% cut remained unchanged.

When Medicare held claims in March and April to give Congress time to stop the scheduled 21.3% payment cuts, 47% of the 159 surveyed radiologists said that they researched opting out of Medicare and treating patients