This spring, unless Congress takes action to prevent it, the federal “Sustainable Growth Rate” law will require a 21.2% cut in the payments Medicare makes to every physician for every service they deliver, ranging from an office visit to major surgery. No business in America could survive if it told its key professionals every year that their compensation would be cut by over 20% regardless of whether they’re doing a good job or not, but that’s what federal law tells physicians in the Medicare program under the Sustainable Growth Rate (SGR) policy.
The leaders and members of Congress know that this kind of draconian, across-the-board cut in payments would make it difficult for many physician practices to survive and would make it more difficult for many Medicare beneficiaries to obtain the care they need. They also know that when Medicare pays physicians less than it costs them to deliver care, physicians are forced to charge other patients more, causing healthcare premiums for workers and businesses to increase. However, for over a decade, Congress’s solution has been to stop each year’s cut from going into effect without repealing the law itself, and this has made the problem in subsequent years even harder to address.
In 2014, three key Congressional Committees reached bipartisan, bicameral agreement on legislation to repeal the SGR. Unfortunately, the legislation failed to pass because leaders in Congress couldn’t agree on how to pay for the cost of repeal.
The way to pay for repealing the SGR isn’t to cut physician payments in another way, cut payments to other providers, refuse to pay for services Medicare beneficiaries need, or make cuts in other programs. The solution is to change the way Medicare pays for healthcare so that physicians can change the way they deliver care, thereby enabling patients to get better care with less total spending. Sufficient savings could be achieved in Medicare to more than cover the costs of SGR repeal by giving physicians the tools they need to keep patients healthy, avoid unnecessary tests and procedures, reduce avoidable hospitalizations, and prevent infections and complications. Achieving these savings only requires slowing the growth in Medicare spending by one-half percentage point per year.
The major barrier to redesigning care delivery to achieve these savings is the current fee-for-service payment system, which penalizes physicians for reducing spending and fails to pay for many services that would be better for patients and reduce spending for Medicare. Most of the “payment reforms” currently being implemented by the Centers for Medicare and Medicaid Services (CMS) don’t remove these barriers, and in some cases they make the problems with the current payment system worse.
Accountable Payment Models — bundled payments, warrantied payments, and condition-based payments — are needed in every specialty to give physicians the flexibility to redesign care along with accountability for the costs and quality of those aspects of care they can control or influence. CMS has not implemented these kinds of payment models quickly enough, particularly for ambulatory care, even though it has the statutory authority to do so.
Instead of waiting to “test” Accountable Payment Models in demonstration projects, CMS should make them immediately available on a voluntary basis to all physicians who wish to participate, and then the Accountable Payment Models can be evolved and improved over time. None of the current Medicare payment systems for physicians or hospitals were tested or evaluated before they were implemented; instead, they are refined every year to address problems that arise, and the same approach can be used for new payment models.
Many physicians, medical societies, and local multi-stakeholder collaboratives are developing Accountable Payment Models that could improve care and reduce spending for conditions ranging from cancer to heart disease, but there is currently no way for them to get participation by their largest payer – Medicare. Congress should require that CMS have at least one Accountable Payment Model available in each of the largest medical specialties within one year, and that it have at least one Accountable Payment Model available in every medical specialty within two years. To achieve these goals, Congress should create a faster pathway for reviewing and implementing the Accountable Payment Models that are already being developed by physician organizations and multi-stakeholder collaboratives across the country.
A new CHQPR report titled How Should Congress Pay for the Cost of Repealing the Sustainable Growth Rate? describes all of these points in greater detail. It defines what kinds of payment approaches will enable savings to be successfully achieved and explains why most of the current CMS payment systems will not do that, and it gives examples of the innovative Accountable Payment Models that are being developed by physician organizations, medical societies, and local multi-stakeholder collaboratives across the country that could improve care for millions of Medicare beneficiaries and save billions of dollars for the Medicare program if the necessary changes in Medicare payment systems are made.
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