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MedPAC Commissioners on Cost of Ending Medicare's Doctor Payment Rate Formula: Write It Off?

By John Reichard, CQ HealthBeat Editor

April 7, 2011 -- The sustainable growth rate (SGR) formula—the mechanism used to set Medicare's yearly physician payment rates—must go, commissioner after commissioner said at a meeting of the Medicare Payment Advisory Commission (MedPAC).

And what about the $300 billion-plus cost over 10 years of getting rid of the SGR? "Write it off," declared commissioners Ronald D. Castellanos and Bruce C. Stuart.

"Write it off" translates into a recognition that Congress isn't going to come up with payment offsets to scrap the SGR formula; it isn't going to raise taxes to pay for it; and it surely isn't going to allow the huge payment cuts the formula now triggers. That's because seniors would lose access to physician care.

In effect it would mean that the cost would be added to the national debt, and to the debt service costs that Americans will have to pay in years to come. And it would be a statement that it's better to pay such costs than let the elderly be unable to find doctors to treat them.

As realistic as that advice might be, it wasn't clear from the meeting that writing it off is what MedPAC will recommend to Congress this fall when it issues a report to lawmakers on how to deal with the Medicare payment formula.

But what is clear is that commissioners do not see a way to come up with $300 billion in offsetting cuts in the Medicare program to pay for scrapping the SGR. And in the end, while the commission may be able to point to some recommendations to trim Medicare spending, it's unlikely that any set of suggestions they can agree on—if they can reach a consensus—would add up to more than a small chunk of the $300 billion cost.

A couple of commissioners mused about other ways to come up with the money—say, ending the war more quickly in Afghanistan or discontinuing the Bush tax cuts. But that isn't exactly within the purview of MedPAC, they quickly added.

Ending the formula once and for all would be less expensive than keeping it and continuing to enact temporary payment patches to block SGR-generated cuts, commissioners say. Such short-term fixes would add even more to the debt.

But physicians will have to accept trade-offs, judging from the discussion on replacing the SGR. One would be recognizing that in return for avoiding huge SGR-generated cuts, they will have to accept an extended period of payment increases that are at best very small. The commissioners also discussed finding other ways to restrain the growth in the volume of Medicare physician services.

MedPAC Vice Chairman Robert Berenson noted, for example, that limits could be set on the growth of certain services. And if that growth was exceeded, payments could be reduced in that particular treatment area. Another suggestion was setting spending targets in high-volume regions of the country and holding back a portion of payments that would be paid only if the targets were met.

Commissioners also recognized that another temporary payment patch would likely be needed while the fate of the SGR is resolved. They said that such a fix should last at least one year, if not considerably more.

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