HealthLawProf Blog

Editor: Katharine Van Tassel
Case Western Reserve University School of Law

Thursday, January 12, 2012

Guest Blogger Jeff Hammond: How Sustainable is the Sustainable Growth Rate?

Jeff%20HammondThanks to Katharine and the other editors here at the Health Law Profs Blog for having me as a guest blogger this month.  During the month, I look forward to sharing a few thoughts with you about health care delivery and finance.  As an initial foray, take a look at these two posts, one from about how prospective application of the Medicare Sustainable Growth Rate (SGR) will affect the take home pay of physicians, and the other from Chicago health lawyer Scott Becker’s Orthopedic, Spine, and Pain Management Review about broader policy issues involved with the application of the SGR.  As you might be aware, when President Obama signed the Temporary Payroll Tax Cut Continuation Act on December 23, 2011, the imposition of SGR was stayed for only two months.  Unless once again modified by Congress, its formula is set to ratchet down physician payments at the beginning of March this year.

If there is one idea I’d like for you to get from this post, it’s that: sometimes the law erects barriers that can inhibit people from doing the very things that the law (and lawmakers) really want that person to do.  In the case of health care, the SGR is such a barrier.  It’s the infamous and very complicated “governor” on the growth of physician’s fees paid for by Medicare.  Its formula is based, in part, on the growth (or lack thereof) of gross domestic product in the broader economy.  Because Medicare payment rates are already thought to be low, Congress has consistently delayed the application of the Sustainable Growth Rate, which if applied, would downwardly adjust doctors’ fees.  To be fair, SGR theoretically could generate a positive update if the variables in its formula lined up just right.  Nevertheless, SGR is distinctive in that it “remembers” past cuts that its formula generated, yet Congress postponed.  Thus, if they were ever to be imposed, the cuts mandated by SGR would be massive.    

However, at the same time that Congress wants to manage the growth of physician fees, it really wants Americans to have better access to primary care physicians.  For example, Congress knew that primary care physicians are both valuable to Americans’ health, yet they are underpaid.  Hence, it provided in the Affordable Care Act for a significant (yet temporary) 10% upward adjustment in fees for certain primary care services (see ACA § 5501(a)(1)).

Congress is playing a grand game of chicken with its contracted doctors.  Congress has enticed physicians to keep playing the game with a 10% fee increase, yet it consistently swerves at the last minute when it pulls back the SGR cuts.  Physicians have every right to be skittish about such gamesmanship from Congress.  It is no wonder that groups like the AARP and the AMA couch the SGR as a healthcare access issue.  They know that doctors will discontinue their participation in Medicare if the SGR is ever imposed.

It is therefore time for Congress to bite the proverbial bullet and fix the SGR once and for all.  Two commentators recently estimated that it will cost upwards of $300 billion to set Medicare physician reimbursement on the right track.  (see Mark Harkins and Erica Stocker, “Congressional Dysfunction Imperils Health Care System,” BNA Health Care Policy Report, January 6, 2012).  Although the right thing to do, it seems implausible in an age of eye-popping deficits and breathtaking defense cuts that the doctors would get $300 billion.  Without such a fix, they are forced to be content with their heads being saved from the guillotine every few months.

It would be irresponsible to lay all of physicians’ money woes at the feet of the SGR.  As an article from CNNMoney pointed out last week, there are several factors that complicate doctors’ quests for profitability: hassles with private payers, overhead costs, and the nature of fee-for-service reimbursement, in which payers are incentivized to package many services into one.  In fact, it would probably be irresponsible for any particular physician to blame real time, balance-the-ledger, pay the employees right now(!!!) woes on the possibility of SGR being imposed and thus driving the fees so low that she will have to declare bankruptcy or go out of business.  No, SGR is contingent.  It looms in the shadows.  It lurks in the corners scaring doctors of what might come next.  But, if imposed, it will be disastrous for doctors’ practices, as ably described by Dr. Matthew Mintz in his post.  But it hasn’t been imposed since 2002, as Bob Herman points out in the Becker article.  One wonders, though, when the infamous other shoe will drop.  And if it ever does, one must also soberly wonder how many doctors will leave Medicare and the practice of medicine altogether.

- Jeff Hammond

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