CMS actuary says SGR bill is short-term fix
On March 26, the House passed the 'doc fix' bill (H.R. 2) that would permanently repeal the widely-opposed sustainable growth rate (SGR) formula. It would also temporarily extend the Children's Health Insurance Program, and increase premiums for higher-income Part B and Part D Medicare beneficiaries. H.R. 2 is expected to also pass the senate, which reconvened this week, and be signed by President Obama. But will the bill's passage really fix the problem?
CMS has doubts
On Friday, Paul Spitalnic, Chief Actuary for the Centers for Medicare and Medicaid Services (CMS) released a report outlining the major provisions of the bill and the anticipated short-term and long-term financial effects. According to the report, "While H.R.2 avoids the significant short-range physician payment issues resulting from the current SGR system approach, it nevertheless raises important long-range concerns that would almost certainly need to be addressed by future legislation."
Under the new system, all physicians would receive a 0.5% per year pay increase over the next four years. Payment rates for services on the physician fee schedule would remain at the 2019 level through 2025. However, starting in 2019, the amounts paid to individual providers would be subject to adjustment based on one of two payment models from which physician can choose: 1) an Alternative Payment Model (APM); or 2) a Merit-Based Incentive Payment System (MIPS). From 2019 through 2024, providers receiving a substantial portion of their revenue from the APM would be eligible for a 5% bonus. Those participating in the MIPS program would be eligible for a portion of a $500 million per year pool that has been allocated for providers who achieve exceptional performance. When those two pools of money expire in 2025, most physicians would see a pay reduction.
Additionally, although the bill specifies physician payment update amounts for the future, the amounts do not take into consideration underlying economic conditions. And according to Spitalnic, they are also not expected to keep pace with the average rate of physician cost increases. "The specified rate updates would be inadequate in years when levels of inflation are higher or when the cumulative effect of price updates not keeping up with physician costs becomes too large," he says in his report. Spitalnic also says that by 2048, physician payment rates under the new system would be lower than under the current SGR formula and "would continue to worsen thereafter."
The report goes on to say, "While H.R. 2 addresses the near-term concerns of the SGR system, the issues of inadequate physician payment rates are ultimately greater. If Medicare payments were to fall to a fraction of payments based on cost drivers, there would be reason to expect that access to physicians' services for Medicare beneficiaries would be severely compromised, particularly considering that physicians are less dependent on Medicare revenue than are other providers, such as hospitals and skilled nursing facilities."
It is estimated that from fiscal year 2015 through 2025, H.R. 2 would increase combined Federal spending for Medicare, Medicaid and the health insurance marketplace by $102.8 billion.