Call for SGR repeal intensified by MedPAC

The American Taxpayer Relief Act, signed into law Jan. 2, overrode a planned 26.5 percent cut to provider payments under the Sustainable Growth Rate (SGR) formula and extended current physician payment rates through 2013 with some offsets to hospitals and certain services. Nonetheless, Medicare payments will continue to be a central point of congressional debates over budget cuts in healthcare and sequestration, the automatic 2 percent cuts across all federal agencies, looming in less than two months.

On Jan. 10, during its first meeting since the fiscal cliff and SGR were forestalled, the Medicare Payment Advisory Commission (MedPAC) warned that there will be fewer options to solve the Medicare payments problem the more that Congress simply defers the SGR. MedPAC intensified its call to repeal the SGR.

Repealing the SGR and developing a comprehensive solution could also provide an incentive to drive physicians to support value-based payment models, such as bundled payments and accountable care organizations, according to Glen Hackbarth, MedPAC chairman and an independent consultant.

Legislation could also promote changes in care delivery models, such as patient-centered medical homes, that coordinate and improve patient care through the use of health IT and health information exchange.

“We believe that that repeal of SGR is urgent. The cost of this will only grow over time. We fear that savings from within the Medicare program that could be used to offset repeal, at least in part, are being applied to other purposes, whether for expansions of coverage in the Affordable Care Act or deficit reduction or short-term extensions of SGR,” Hackbarth said.

Once used for those purposes, the savings would no longer be available to offset repeal of the SGR, which would pose an increasing threat to access to care for Medicare beneficiaries. While seniors continue to have good access to physicians’ services in most areas of the country, “I don’t think anyone should be lulled into confidence that it will always stay that way,” Hackbarth said.

“There is a growing risk that it could destabilize if we continue down this path of just deferring a decision on SGR,” he warned.

The balance between supply and demand for services in many markets is very tight. In addition, a large new cohort of people are aging into Medicare now and a large group of physicians who provide care for Medicare beneficiaries are nearing retirement, which could reduce supply.

“Given the tight balance between supply and demand in many markets, relatively small shifts in the patient population or the supply of physicians could create rather quickly significant problems of access for Medicare beneficiaries,” Hackbarth added.

Legislation repealing SGR would yield an opening to rebalance payments between primary and specialty care and create an incentive for physicians to move a growing share of their care outside traditional fee-for-service Medicare and inside new payment models, he added.

MedPAC, which advises Congress on Medicare payment issues, will deliver the SGR repeal and other recommendations to lawmakers in its March report. The commission has sought the SGR appeal since 2011.