This Friday, the U.S. House of Representatives is scheduled to vote on HR 4015, a bill that would replace the Sustainable Growth Rate (SGR)—the formula used to update Medicare payment for doctors.
A Missed Opportunity
By stabilizing physician payments and preventing a 24 percent payment cut, this new bill is arguably an improvement over the current law. However, it is also a missed opportunity. The 195-page bill would:
- Guarantee a 0.5 percent Medicare payment update for five years during a transition to a new Medicare payment system;
- Consolidate three existing Medicare “value-based” payment programs into a single merit- based incentive payment system;
- Reward (or penalize) doctors based on their adherence to performance standards: and
- Provide for an alternative reimbursement in the form of “alternative payment models,” thereby improving quality.
Doctors would be qualified to enroll in an APM based on the level of their Medicare revenue, and these models themselves would be subject to variations and improvements based on physician recommendations. In rewarding quality over quantity, the bill provides for HHS collaboration with physicians, and the use of “physician developed clinical guidelines.” The bill’s sponsors hope that greater transparency, and the provision of better information to doctors and patients, will improve the program.
Though HR 4015 is a legislative breakthrough, it hardly constitutes a revelation. There is nothing imaginative about paying doctors for compliance with government guidelines. Nor should physicians break out the champagne because their professional representatives will “collaborate” with the Secretary of HHS on performance standards. Furthermore, the bill is unlikely to reduce the politicization of Medicare payments, or alter the destructive dynamics of the frenzied lobbying push to increase special interest reimbursement. Additionally, it is unlikely to reduce the massive regulatory overhead burdening medical practice. And this new bill does little to reverse the trend toward government control over the practice of medicine—a slide that has accelerated under Obamacare. Indeed, modern Medicare reimbursement policy represents a significant retreat from the original Medicare standard (42 U.S. Code, 1395) that Congress enacted in 1965 to safeguard doctors’ professional independence: “Nothing in this title shall be construed to authorize any federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided….”
Value for Money
Beyond the current regulatory boundaries of the bill, Congress could expand physician and patient options even further. For example, Congress could allow doctors and patients to negotiate any difference between what the government pays for Medicare services and the doctors’ fees. With regard to doctors, this would mean accepting the base Medicare payment and forgoing any bonus payments, while disclosing the prices of their services. In an information-driven environment, real price competition among physicians would secure value for patient dollars while stimulating clinical innovation and higher quality of treatment services.
Looking Ahead
HR 4012 is expected to add $138 billion in additional Medicare spending over the next 10 years, although its sponsors are proposing to offset those costs by delaying Obamacare’s individual health insurance mandate. The elimination of the mandate is sound policy and continues past congressional practice of paying for previous Medicare “doc fixes” with health spending cuts. However, by only “delaying” the mandate—rather than repealing it—the bill could potentially add to the deficit beyond the standard 10-year budget window. SGR, after all, pertains to Medicare. But using savings from the mandate, in sharp contrast to previous “fixes” financed by Medicare spending reductions, does nothing to alter the internal dynamics of the Medicare program that is saddling future taxpayers with crushing financial burdens.
Congress should be working toward comprehensive Medicare reform based on defined contribution financing (premium support) as found in the patient-centered Medicare drug program. Such reform would not only secure serious savings for taxpayers and seniors, but would also end the bureaucratic micromanagement of the medical profession that characterizes today’s program. Short of premium support, only permanent structural changes, such as modernizing Medicare’s benefit structure, raising the age of eligibility, or reducing taxpayer subsidies to Medicare’s wealthiest recipients, could secure the necessary permanent savings. The bill is thus a missed opportunity to improve Medicare while laying the groundwork for premium support.
Recent reports indicate that House action would only be the first act in the congressional drama to fund an SGR repeal. If future actions produce a flawed bill that fails to control spending, Congress must go back to the drawing board and get it right.