MedPAC Looks at Smaller Cuts to Avoid SGR Cliff

WASHINGTON – To avoid a nearly 30% physician pay cut Jan. 1, Congress should instead adopt a 10-year plan that freezes primary care pay and cuts specialist pay by 5.9% three years in a row. That’s according to a proposal presented by staffers at a Sept. 15 meeting of the Medicare Payment Advisory Commission.

While such a solution is expensive – with a $200 billion price tag – it reduces the estimated cost of replacing the current Sustainable Growth Rate (SGR) formula by $100 billion, according to the MedPAC staff presentation.

In formulating their proposal, MedPAC staffers sought to address four key concerns:

• To cut the link between Medicare fee schedule updates and cumulative spending called for by the SGR.

• To replace the SGR with a predictable 10-year system of fee updates.

• Halt the nearly 30% pay cut on Jan. 1.

• Balance the cost of reform with maintaining access to care.

The proposal would result in a 2% annual increase in federal spending per Medicare beneficiary, but is budget neutral based on a number of possible savings identified. For example, the proposal outlines $235 billion in possible savings from pharmaceuticals ($75 billion), post-acute care ($49 billion), beneficiaries ($33 billion), hospitals ($26 billion), labs ($21 billion), Medicare Advantage ($12 billion), and durable medical equipment ($14 billion).

While specialists bear more of the costs, they also rely on a higher percentage of Medicare patients and will likely benefit from the expected steady increase in beneficiaries in the market, according to the proposal.

Response to the proposal was swift and vehement.

"This proposal simply devalues the expertise and critical care that specialists provide to Medicare patients and will further restrict access to care for them," Dr. Alex Valadka said in a statement. Dr. Valadka is a neurosurgeon from Austin, Tex., and spokesperson for the Alliance of Specialty Medicine.

"There comes a point where if you keep cutting specialists’ reimbursements, we can’t maintain our practice, keep our doors open, and employ staff," Dr. Valadka added. "The end result of that means we can’t properly take care of our most vulnerable patients."

The American Medical Association called the plan "misguided."

"The new cuts are inconsistent with MedPAC’s previous recommendations to stop cuts to physicians who care for Medicare patients, because they threaten access to care for patients and would have severe consequences for the Medicare system," said AMA president Dr. Peter Carmel in a statement. "Drastic cuts pose a very real risk to physicians’ ability to retain staff, care for Medicare patients, and make the investments needed to modernize their practices and participate in care delivery models intended to improve quality while reducing costs in the Medicare system."

MedPAC commissioners will consider the report and finalize the commission’s recommendations at its October meeting.

Regardless of whether Congress adopts this proposal, the current system must be addressed, MedPAC Chairman Glenn Hackbarth said at the meeting.

"If large Medicare savings are used for other purposes ... and SGR is not addressed, we could end up with long-term destabilization," Mr. Hackbarth said.

WASHINGTON – To avoid a nearly 30% physician pay cut Jan. 1, Congress should instead adopt a 10-year plan that freezes primary care pay and cuts specialist pay by 5.9% three years in a row. That’s according to a proposal presented by staffers at a Sept. 15 meeting of the Medicare Payment Advisory Commission.

While such a solution is expensive – with a $200 billion price tag – it reduces the estimated cost of replacing the current Sustainable Growth Rate (SGR) formula by $100 billion, according to the MedPAC staff presentation.

In formulating their proposal, MedPAC staffers sought to address four key concerns:

• To cut the link between Medicare fee schedule updates and cumulative spending called for by the SGR.

• To replace the SGR with a predictable 10-year system of fee updates.

• Halt the nearly 30% pay cut on Jan. 1.

• Balance the cost of reform with maintaining access to care.

The proposal would result in a 2% annual increase in federal spending per Medicare beneficiary, but is budget neutral based on a number of possible savings identified. For example, the proposal outlines $235 billion in possible savings from pharmaceuticals ($75 billion), post-acute care ($49 billion), beneficiaries ($33 billion), hospitals ($26 billion), labs ($21 billion), Medicare Advantage ($12 billion), and durable medical equipment ($14 billion).

While specialists bear more of the costs, they also rely on a higher percentage of Medicare patients and will likely benefit from the expected steady increase in beneficiaries in the market, according to the proposal.

Response to the proposal was swift and vehement.

"This proposal simply devalues the expertise and critical care that specialists provide to Medicare patients and will further restrict access to care for them," Dr. Alex Valadka said in a statement. Dr. Valadka is a neurosurgeon from Austin, Tex., and spokesperson for the Alliance of Specialty Medicine.

"There comes a point where if you keep cutting specialists’ reimbursements, we can’t maintain our practice, keep our doors open, and employ staff," Dr. Valadka added. "The end result of that means we can’t properly take care of our most vulnerable patients."

The American Medical Association called the plan "misguided."

"The new cuts are inconsistent with MedPAC’s previous recommendations to stop cuts to physicians who care for Medicare patients, because they threaten access to care for patients and would have severe consequences for the Medicare system," said AMA president Dr. Peter Carmel in a statement. "Drastic cuts pose a very real risk to physicians’ ability to retain staff, care for Medicare patients, and make the investments needed to modernize their practices and participate in care delivery models intended to improve quality while reducing costs in the Medicare system."

MedPAC commissioners will consider the report and finalize the commission’s recommendations at its October meeting.

Regardless of whether Congress adopts this proposal, the current system must be addressed, MedPAC Chairman Glenn Hackbarth said at the meeting.

"If large Medicare savings are used for other purposes ... and SGR is not addressed, we could end up with long-term destabilization," Mr. Hackbarth said.

WASHINGTON – To avoid a nearly 30% physician pay cut Jan. 1, Congress should instead adopt a 10-year plan that freezes primary care pay and cuts specialist pay by 5.9% three years in a row. That’s according to a proposal presented by staffers at a Sept. 15 meeting of the Medicare Payment Advisory Commission.

While such a solution is expensive – with a $200 billion price tag – it reduces the estimated cost of replacing the current Sustainable Growth Rate (SGR) formula by $100 billion, according to the MedPAC staff presentation.

In formulating their proposal, MedPAC staffers sought to address four key concerns:

• To cut the link between Medicare fee schedule updates and cumulative spending called for by the SGR.

• To replace the SGR with a predictable 10-year system of fee updates.

• Halt the nearly 30% pay cut on Jan. 1.

• Balance the cost of reform with maintaining access to care.

The proposal would result in a 2% annual increase in federal spending per Medicare beneficiary, but is budget neutral based on a number of possible savings identified. For example, the proposal outlines $235 billion in possible savings from pharmaceuticals ($75 billion), post-acute care ($49 billion), beneficiaries ($33 billion), hospitals ($26 billion), labs ($21 billion), Medicare Advantage ($12 billion), and durable medical equipment ($14 billion).

While specialists bear more of the costs, they also rely on a higher percentage of Medicare patients and will likely benefit from the expected steady increase in beneficiaries in the market, according to the proposal.

Response to the proposal was swift and vehement.

"This proposal simply devalues the expertise and critical care that specialists provide to Medicare patients and will further restrict access to care for them," Dr. Alex Valadka said in a statement. Dr. Valadka is a neurosurgeon from Austin, Tex., and spokesperson for the Alliance of Specialty Medicine.

"There comes a point where if you keep cutting specialists’ reimbursements, we can’t maintain our practice, keep our doors open, and employ staff," Dr. Valadka added. "The end result of that means we can’t properly take care of our most vulnerable patients."

The American Medical Association called the plan "misguided."

"The new cuts are inconsistent with MedPAC’s previous recommendations to stop cuts to physicians who care for Medicare patients, because they threaten access to care for patients and would have severe consequences for the Medicare system," said AMA president Dr. Peter Carmel in a statement. "Drastic cuts pose a very real risk to physicians’ ability to retain staff, care for Medicare patients, and make the investments needed to modernize their practices and participate in care delivery models intended to improve quality while reducing costs in the Medicare system."

MedPAC commissioners will consider the report and finalize the commission’s recommendations at its October meeting.

Regardless of whether Congress adopts this proposal, the current system must be addressed, MedPAC Chairman Glenn Hackbarth said at the meeting.

"If large Medicare savings are used for other purposes ... and SGR is not addressed, we could end up with long-term destabilization," Mr. Hackbarth said.