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The Future of SGR
This post was authored by Michael Chernew, PhD, who sits on the Editorial Panel for the ACC/AJMC Community on Payment Innovations and is a MedPAC Commissioner. Dr. Chernew's views, however, are his own and do not represent those of ACC, AJMC or MedPAC.
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A lot has been written of late about the Sustainable Growth Rate (SGR) system. One point of consensus appears to be that the system is not sustainable. It needs to be repealed. The controversy surrounds what to do after the repeal. Ideally, the physician payment system of the future would promote beneficiary access to high quality care and be fiscally sustainable.
The estimated 10 year cost of replacing the SGR with a freeze in physician fees is over 300 billion dollars. Replacement with a fee schedule that is adjusted for inflation would be even more costly and options to finance the costs are limited. Debt financing seems impossible given out current fiscal situation. An increase in taxes is possible, but seems politically infeasible. Without taxes or deficit spending, funding an SGR fix requires cuts from elsewhere in the budget, including elsewhere in Medicare.
The recent MedPAC recommendation assumed financing entirely from Medicare, though MedPAC did not necessarily endorse financing exclusively from Medicare. This exercise illustrates how difficult financing is. MedPAC was only able to offset a fraction of the 300 billion dollars by accumulating a series of cost saving measures that affect a wide range of providers and beneficiaries. Because the offsets were incomplete, cuts in physician fees were still needed to avoid increased Medicare spending. With constraints against raising taxes or debt financing, alternatives are limited. Tweaks to payment around the fee-for-service framework are unlikely to achieve significant score able savings and unlikely to pave the way to the health care system we deserve.
Shifting costs to beneficiaries is possible. In fact, reform of the benefit design to encourage judicious use of care and improve cost consciousness among patients can improve efficiency and help fund an SGR fix. This benefit redesign should be a part of the solution; however, it is not clear how much could be saved through such redesign and it is unlikely to be the sole foundation of a solution. Changes to benefit design will certainly raise serious concerns about equity, access and quality depending on how such a shift is implemented. In the meantime, payment reform must be addressed.
A way out of the world characterized by the grim fee trajectory remains, but it requires a change in business model. In addition to the payment proposals, MedPAC offered recommendations that support new delivery models. Even with the recommended fee cuts, the projected payment per beneficiary rises. If providers can capture the overall revenue, control rising volumes and eliminate waste (which most agree is significant), high quality care can be coupled with financial success. Clearly, such a transition will not be easy and evidence that providers can be successful is emerging, at best. The regulations necessary to guide such a system are still being developed and far from perfect. Yet the alternative, as the MedPAC recommendations illustrate, is not appealing. Getting on with the task of reforming the whole system seems the only way forward.
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