A new survey of physicians finds just 7 percent support eliminating fee for service payments, but there’s good news: physicians support improving the quality of care and limiting services that provide little benefit. Rewarding quality of care and reducing unnecessary utilization is exactly the focus of a new bill in Congress to replace the current Sustainable Growth Rate (SGR) which is a formula that determines the annual updates applied to Medicare physician payments.
The current bill addresses a significant flaw in the SGR: payment updates are applied uniformly and nationally, regardless of individual or practice parsimony/excess. Originally, back in 1989, policy experts discussed the possibility of disaggregating the expenditure targets and updates by region (as it is in some countries), but that never happened.
So, acknowledging that the SGR is an imperfect cost containment mechanism, at least the SGR does try to reward providers when costs are contained, and correspondingly reduce fees when expenditure targets are exceeded. The latter situation is uncomfortable for all however; in practice, cost-containment is hard to do. The payment update was supposed to fluctuate like a thermometer, based on success in meeting Medicare expenditure targets. When the thermometer is forecast to dip below zero, there is pressure on Congress to stop the mercury falling. Here is an alarming video advertisement prepared by the Texas Medical Association that gives you a flavor of that pressure. Granted, 25% cuts are too large, but the cuts get more extreme precisely because Congress forestalled prior year cuts–something that is not made clear, as if the cuts today have little to do with the past. As I have argued previously, the problem is that Congress is like Ulysses and the Sirens. Congress is unable to resist intervening if there are cuts likely.
The bottom line: provide individual or practice-based updates for higher quality and cost-effective care. If that fails to hold down expenditure, Congress needs to let payment updates go up and down in order for the incentives to work.