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Medicare physician reimbursement – a two year fix?

It looks like Congress may well include a two-year fix for Medicare physician reimbursement in a sort-of catch-all bill focused on extending the payroll tax cut.
At least that’s the way it looks this morning.
The Medicare SGR formula/process was first implemented in 2000, intended to establish an annual budget for Medicare’s physician expenses and thereby better control what had been steadily increasing costs. Each year, if the total amount spent on physician care by Medicare exceeded a cap, the reimbursement rate per procedure for the following year would be adjusted downward.
And for ten of the last eleven years, reimbursement – according to SGR – should have been cut, but each year (except 2002) it was actually increased, albeit marginally. The result is a deficit that is now about 300 billion dollars, a deficit that we’re carrying on our books, and, by the way, is not addressed in the bill currently under consideration in Congress.
The reason the deficit is still there, and still growing, is simple – fixing SGR permanently would require acknowledging the deficit and thereby adding it to the total debt.
But not fixing SGR may well be worse, as it is a fatally flawed cost containment “approach”. The SGR attempts to use price to control cost. The complete failure of the SGR approach to control cost is patently obvious, as utilization continues to grow at rapid rates. This was a problem four years ago, and its done nothing but get worse. Not only does the RBRVS/SGR approach contribute to cost growth, it also ‘values’ procedures – doing stuff to patients – more than listening to them (I realize this is an unfair comparison, for more click here).
There is at least one Senator willing to acknowledge the accumulated deficit Sen Jon Kyl (R AZ).; Kyl is proposing using the “savings” from ending the engagement in Iraq and Afghanistan to offset the accumulated deficit, thereby allowing Congress to come up with a permanent fix. Kyl’s backed repeal of SGR before, notably when he joined with Sen Majority Leader Harry Reid (D NV) to push the Super-Committee to include the fix in their work.
What does this mean for you?
Fixing SGR for two years will remove this political dynamite from the landscape till 2014 – and give some stability to provider prices based on Medicare (which applies to lots of group and workers comp contracts).

One thought on “Medicare physician reimbursement – a two year fix?”

  1. The problems are two-fold. Wage and price controls strictly aimed at private physician practices do not work. Hospital reimbursement should have been re-evaluated as well since 2000. The product of diminished re-imbursement to physicians has been flagrant self referral and increased procedure volume. Congress has not shown a willingness to address this except to aggrevate the situation: (The Stark law”in office exclusion” made self referral “bullet proof”. )The physicians who control the patients(i.e. Surgeons, Oncologists) simply self refer at increased volume when (imaging for example) is re-imbursed at lower rates.

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Joe Paduda is the principal of Health Strategy Associates



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