Medicare: same song, different verse

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JerrySlaughtercolorJerry Slaughter
Executive Director

The recent congressional hearings on physician payment reform in Medicare had an oddly fatalistic tone to them, as if the participants knew that events and circumstances had inevitably conspired to leave very few options open. Congress and two administrations have been kicking the Medicare “doc fix” can down the road for so long that it will take nearly a third of a trillion dollars to just fill the hole it has created in the federal budget.

The ironically named sustainable growth rate (SGR) formula was put into place 15 years ago in an attempt to slow the growth in spending for physician services under Medicare. It tied physician payments to a Rube Goldberg-esque mathematical formula that was driven in part by growth in the nation’s gross domestic product, as if the medical needs of older Americans rise and fall with gyrations in GDP. Predictably, the experiment failed miserably. Now, with federal budget deficits exceeding a trillion dollars annually stretching out into the future, the country can’t print or borrow enough money to pay the bill.

So, Congress will probably do what it does best and keep kicking the can down the road for a few more years. They’ll do that by freezing fees yet again and hoping for a collective epiphany that produces a novel payment methodology to cut spending. No one knows exactly how this will be done, particularly when faced with the sobering reality that the program will grow from today’s 45 million to 75 million beneficiaries in a scant 15 years.

Because nobody really knows what else to say or do, most all the experts are proclaiming that the old, clunky fee-for-service system will soon be dead, in favor of bundled payments, or ACOs, or DRG-like episodes of care payments, or paying doctors for quality, value and outcomes, not volume (which is currently all the rage among government planners). The new health reform legislation is chock full of carrots and sticks intended to cajole or bludgeon physicians into practicing what the government determines to be quality medicine.

If all of that doesn’t work, it probably doesn’t matter anyway, because by fiscal year 2015, the Orwellian-sounding Independent Payment Advisory Board (IPAB) created by the reform legislation will start making binding recommendations to reduce the cost of Medicare. The fifteen member Board (each making a salary of $165,300) will do it by adjusting Medicare spending based on the growth of GDP (sound familiar?), except that hospitals and nursing homes are exempt from any cuts until 2020. That pretty much leaves physician payments as the only realistic place to cut Medicare spending for the first five years of IPAB control. Heck, by then, the old SGR methodology may be fondly recalled as the good old days.

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