Organized medicine pushes Congress for clean slate on Medicare payment formula

Establishing a new budget baseline for physicians' Medicare pay could increase the chances that Congress can pass a comprehensive solution this year.

By — Posted March 30, 2009

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

As lawmakers earlier in March prepared to launch the annual budget process for the upcoming year, physician organizations urged them to take a longer view when it comes to fixing the Medicare payment system.

The American Medical Association was one of the groups urging Congress to adopt a more realistic budgetary baseline as a first step toward addressing a long-term solution to the much-criticized Medicare physician payment mechanism, known as the sustainable growth rate formula.

By assuming a new baseline, also called "re-basing," Congress would project spending more accurately, the AMA and others said. It essentially would wipe the budgetary slate clean by giving Congress a clearer forecast of spending and taxpayer obligations, and it would allow for more time to craft a well-reasoned response to the long-term payment problem, they added.

At press time in late March, both the Senate and House Budget Committees were working on the details of their fiscal 2010 budget resolutions, the first chance lawmakers would have to pursue a re-basing tactic.

Testifying before the House Committee on Small Business on March 18, AMA Board of Trustees Chair Joseph M. Heyman, MD, implored lawmakers to establish a new SGR baseline to avoid the 11th-hour temporary actions Congress has taken in recent years to forestall steep cuts in Medicare physician payment rates. Because lawmakers did not reset the baseline when implementing those patches, physicians face a cut of about 21% on Jan. 1, 2010. Establishing a new baseline this year would reverse that cut, effectively accounting fully for the interventions that lawmakers have made since 2002.

The concept of re-basing received a boost in late February from President Obama, who departed from Bush administration strategy in his own fiscal 2010 budget proposal by including an assumption that fixing Medicare pay would cost $330 billion over 10 years. Even if Congress followed Obama's lead by re-basing the SGR, it still would need to repeal or reform the system through new legislation.

"The AMA strongly supports the assumption of a new physician payment baseline in the administration's budget," Dr. Heyman said. "Re-basing is a smart, realistic and transparent approach to addressing rising health care costs because it allows accurate forecasts of what those costs are going to be."

The AMA is not alone in supporting the concept.

Jeffrey P. Harris, MD, president of the American College of Physicians, also testified at the House hearing. He said masking the costs of stopping the pay cuts does not make the costs go away -- it simply postpones them, making the true cost of the next patch even greater.

"This creates an insurmountable barrier to a long-term solution," Dr. Harris said. "President Obama's budget is a marked departure from past practices because it acknowledges what we all know to be true, which is that preventing pay cuts to doctors will require that Medicare baseline spending be increased accordingly."

The American College of Surgeons also supports a payment overhaul, said John T. Preskitt, MD, a general surgeon and ACS board of regents member, testifying before the House committee. "Medicare payments for many surgical procedures have been reduced significantly over the past 20 years, and in some cases, they have been cut by more than half from reimbursement levels in the late 1980s, before adjusting for inflation."

Small-business struggles

A more permanent payment solution would be welcome for all physicians but especially for those running their practices as small businesses that cannot absorb the steep losses projected under the current formula, Dr. Heyman said.

Physicians project a crisis in patient access if Medicare physician payments fall further behind practice cost increases. In a February 2008 AMA survey, 60% of responding physicians said they would limit the number of new Medicare patients they treat if the pay cut scheduled for July 2008 went through. More than half said they would not be able to meet their practice payroll and would be forced to reduce office staff.

Struggles with Medicare payment levels come at a time when more than 80% of physician office visits are to practices with five or fewer physicians, the ACP estimated.

Some lawmakers have taken note of the particular burden shouldered by small practices.

"Small businesses make up nearly 70% of all health care practices, and they recognize that the current system is simply not working," said Rep. Nydia M. Velazquez (D, N.Y.), chair of the House Small Business Committee.

Next steps

Whether or not Congress decides to adjust its spending assumptions for Medicare physicians, lawmakers still would need to legislate a costly fix to the current system. The SGR formula and the decision by Congress not to reset it in recent years has created as much as a $300 billion gap over 10 years between what physicians are projected to be paid and how much their costs of providing care are expected to increase, according to the Congressional Budget Office.

Comprehensive action this year ultimately could pave the way for a new system that accurately reflects increases in medical practice costs, Dr. Heyman said. It also would mean that tens of billions of dollars each year that are spent in the scramble to provide a temporary patch would be available for other important reforms. Those could include expanding health coverage for the uninsured, adopting health information technology, ensuring an adequate physician work force, and investing in prevention and wellness programs that would help control costs over the long term.

The bottom line is that a major pay system overhaul is needed this year to ensure long-term access to care for seniors, Dr. Heyman said.

"We need to find ways to keep practicing physicians caring for seniors and encourage the best and brightest students to become physicians," he said. "Permanent Medicare physician payment reform will help us achieve that goal."

Back to top


Years in the making

The current problem with the Medicare physician pay system is due in part to the fact that Congress did not always reset the payment formula baseline every time it passed a temporary payment patch since 2002. So when the most recent patch wore off, the system acted as if none of the patches had ever gone into effect, and the size of the next projected cut ballooned.

(Jan. 1, 2008)
(July 1, 2008)

Source: American Medical Association research, Medicare trustees reports, Centers for Medicare & Medicaid Services

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story