Harvard Analysts ID Sources of Medicare-Spending Gap
Implementation of the Sustainable Growth Rate, or SGR, formula—the formula ostensibly used to control Medicare spending and physician reimbursement for Medicare services—has been stayed numerous times since it was legislated in the late 1990s. As Harvard policy analysts describe in a newly published study at the NEJM website, the law dictates that the Medicare spending target be periodically set on the basis of several national measures (eg, per capita GNP, Medicare growth), and that, if actual Medicare expenditures on physicians’ services exceed the target, an SGR-defined cut kicks in to rein in these expenditures.
Almost every year since 2002, the Harvard analysts affirm, the actual expenditures have surpassed the target, and the SGR formula has dictated cuts to close this spending gap or “hole.” But Congress—for economic and political (Congress? political?) reasons—has repeatedly sustained these cuts, which are cumulative with each passing stay. The most recent SGR-defined cut in physician fees, now an
untenable, practice-killing 27.4%, was temporarily stayed by Congress in December. However, the
cut will, at least theoretically, occur at the end of this temporary
stay, the end of February—unless Congress votes on yet-another stay. Abolishing the SGR formula altogether has been terribly problematic, because canning the law adds tremendously to the already tremendous US deficit, and
pundits either differ or are entirely at sea about a replacement bill that
would mitigate the costs of trashing the formula.
In the Harvard study, sources of the spending gap or hole, from 2002 to 2009, were examined by state and specialty, and considerable differences were found by either parameter. For instance, the specialty of cardiology—perhaps justifiably, perhaps not—contributed substantially to total expenditures and excess growth during the examined time period. Between 2003 and 2009, the specialty overshot its SGR target by nearly 80%. On the other hand, general surgery undershot its estimated SGR target by more than 100%. The point: it would be unfair to penalize general surgeons with an across-the-board SGR cut if they didn’t contribute to excessive Medicare spending.
The authors’ conclusion, however, is not to readjust the SGR-defined cut by specialty or state, but to go more granular to control physicians’ Medicare reimbursement. In an accompanying audio commentary, anchor author Michael Chernew calls Congress’s short-term fixes “shameful” and argues that the least-reprehensible solution is to have Medicare reimbursements based on the expenditures of smaller physicians’ organizations (something like accountable care organizations), which would accept “global payments or payments bundled by episode of care.” These smaller organizations would allow physicians to control fees, he argues, and to take greater responsibility for their expenditures by “eliminating lower-value therapies and delivering higher-value health care.” On the basis of observed experience in Massachusetts, Chernew estimates that MDs could be pushed into these organizations “very rapidly,” say within the next 3-4 years, depending on how the SGR formula is “fixed” by Congress.
Image of the Grand Canyon from the Association of Environmental and Engineering Geologists.