MedPAC Recommends Replacing SGR, Cutting Specialist Pay
The Medicare Payment Advisory Commission (MedPAC) is an independent Congressional agency established to advise the U.S. Congress on issues affecting Medicare. The commission’s statutory mandate is quite broad. In addition to advising Congress on payments to private health plans participating in Medicare and providers in Medicare’s traditional fee-for-service program, MedPAC is also tasked with analyzing access to care, quality of care, and other issues affecting Medicare. The commission issues reports several times a year based on MedPAC’s charge and ongoing analysis of the Medicare system. It should not come as a surprise that some reports are more controversial than others. For the March 2012 report, MedPAC is recommending replacing the Sustainable Growth Rate (SGR) formula with an alternative payment mechanism. While the Academy and others in the physician community have long supported and advocated for a full repeal of the flawed SGR formula, MedPAC’s latest recommendations are not the answer, and, if implemented, will likely exacerbate other problems within the Medicare program. The reforms seek to eliminate the 27.4-percent cut to Medicare physician payments scheduled for January 1, 2012, and replace it with the following four recommendations. The first recommendation is designed to realign the fee-schedule payments to support primary care. This includes a three-year, 5.9-percent reduction in the fee schedule’s conversion factor for services other than primary care, then a freeze for another seven years. Primary care rates would be frozen for 10 years, with primary care defined by specialty and utilization of Primary Care codes similar to the Primary Care bonus payment. MedPAC says these changes to fee schedule payments would limit the cost of repealing the SGR, ensure access to care for beneficiaries, and would increase fee schedule revenue through increased participation and utilization of Medicare services. The second recommendation is to collect data to improve payment accuracy. According to MedPAC, the Department of Health and Human Services (HHS) lacks current, objective data needed for work and practice expense relative value units (RVUs) because of costly implementation and low response rate, bias in surveys because of medical society’s subjectivity, and burdensome reporting measures. The recommendation calls for the collection of data from practitioner offices and basing RVUs on efficient offices’ data; using data from electronic health records (EHR), patient scheduling, and billing systems; and the evaluation and adjustment of RVUs as required by the Affordable Care Act. The third recommendation calls for the identification of overpriced services using the data collected from their second recommendation to identify and revalue overpriced services. MedPAC also recommends HHS meet an annual numeric goal of reducing RVUs at least 1 percent for a defined period of time. Finally, MedPAC calls for accelerated delivery system reform through increased opportunities for participation in new models of payment (bundled payment, accountable care organizations [ACOs], capitated models, and shared savings programs) that shift Medicare payment away from the traditional fee-for-service structure. This includes increased opportunities for shared savings for physicians and health professionals that join or lead ACOs in two-sided risk modes by basing the spending benchmark on higher fee-schedule growth rates. To pay for these reforms, MedPAC is recommending a package of $235 billion that consists of 32 percent of the savings coming from prescription drugs, 21 percent from post acute care, 14 percent from beneficiaries, 11 percent from hospitals, 9 percent from labs, 6 percent from durable medical equipment, 5 percent from Medicare Advantage, and 2 percent from other sources. These savings are Tier 1 and Tier 2 offsets, with Tier 1 offsets defined as savings MedPAC has recommended in the past and Tier 2 coming from previous recommendations from MedPAC, the Government Accountability Office (GAO), the Office of the Inspector General (OIG), the Congressional Budget Office (CBO), and HHS. The AAO-HNS supports the repeal and replacement of the SGR formula, but does not support the specific proposals MedPAC is putting forward because they retain many of SGR’s current flaws, undermine our physicians’ abilities to participate in payment and delivery reforms, and call for payment rates that the commission itself has previously said could reduce Medicare beneficiaries’ access to medical care. The Academy signed onto a letter spearheaded by the American Medical Association (AMA) on October 3, 2011, expressing this opposition. For updates as this issue progresses, go towww.entnet.org/Practice/Medicareupdates.cfm.
The commission issues reports several times a year based on MedPAC’s charge and ongoing analysis of the Medicare system. It should not come as a surprise that some reports are more controversial than others. For the March 2012 report, MedPAC is recommending replacing the Sustainable Growth Rate (SGR) formula with an alternative payment mechanism. While the Academy and others in the physician community have long supported and advocated for a full repeal of the flawed SGR formula, MedPAC’s latest recommendations are not the answer, and, if implemented, will likely exacerbate other problems within the Medicare program. The reforms seek to eliminate the 27.4-percent cut to Medicare physician payments scheduled for January 1, 2012, and replace it with the following four recommendations.
The first recommendation is designed to realign the fee-schedule payments to support primary care. This includes a three-year, 5.9-percent reduction in the fee schedule’s conversion factor for services other than primary care, then a freeze for another seven years. Primary care rates would be frozen for 10 years, with primary care defined by specialty and utilization of Primary Care codes similar to the Primary Care bonus payment. MedPAC says these changes to fee schedule payments would limit the cost of repealing the SGR, ensure access to care for beneficiaries, and would increase fee schedule revenue through increased participation and utilization of Medicare services.
The second recommendation is to collect data to improve payment accuracy. According to MedPAC, the Department of Health and Human Services (HHS) lacks current, objective data needed for work and practice expense relative value units (RVUs) because of costly implementation and low response rate, bias in surveys because of medical society’s subjectivity, and burdensome reporting measures. The recommendation calls for the collection of data from practitioner offices and basing RVUs on efficient offices’ data; using data from electronic health records (EHR), patient scheduling, and billing systems; and the evaluation and adjustment of RVUs as required by the Affordable Care Act.
The third recommendation calls for the identification of overpriced services using the data collected from their second recommendation to identify and revalue overpriced services. MedPAC also recommends HHS meet an annual numeric goal of reducing RVUs at least 1 percent for a defined period of time.
Finally, MedPAC calls for accelerated delivery system reform through increased opportunities for participation in new models of payment (bundled payment, accountable care organizations [ACOs], capitated models, and shared savings programs) that shift Medicare payment away from the traditional fee-for-service structure. This includes increased opportunities for shared savings for physicians and health professionals that join or lead ACOs in two-sided risk modes by basing the spending benchmark on higher fee-schedule growth rates.
To pay for these reforms, MedPAC is recommending a package of $235 billion that consists of 32 percent of the savings coming from prescription drugs, 21 percent from post acute care, 14 percent from beneficiaries, 11 percent from hospitals, 9 percent from labs, 6 percent from durable medical equipment, 5 percent from Medicare Advantage, and 2 percent from other sources. These savings are Tier 1 and Tier 2 offsets, with Tier 1 offsets defined as savings MedPAC has recommended in the past and Tier 2 coming from previous recommendations from MedPAC, the Government Accountability Office (GAO), the Office of the Inspector General (OIG), the Congressional Budget Office (CBO), and HHS.
The AAO-HNS supports the repeal and replacement of the SGR formula, but does not support the specific proposals MedPAC is putting forward because they retain many of SGR’s current flaws, undermine our physicians’ abilities to participate in payment and delivery reforms, and call for payment rates that the commission itself has previously said could reduce Medicare beneficiaries’ access to medical care. The Academy signed onto a letter spearheaded by the American Medical Association (AMA) on October 3, 2011, expressing this opposition. For updates as this issue progresses, go towww.entnet.org/Practice/Medicareupdates.cfm.