Zombies in Washington!
Zombie: (a) a will-less and speechless human only capable of automatic movement who is held to have died and been reanimated. (b) The Sustainable Growth Rate.
By means of the Balanced Budget Act of 1997, Congress created the Sustainable Growth Rate, or “SGR” to us who know and love it, a will-less and speechless rule whose automatic movement seeks to annually wreak havoc with Medicare payments to physicians. This inane auto-pilot tries to link total physician payments under Medicare to the growth rate in the overall economy. Why Medicare physician payments, as distinct from other Medicare payments, should grow in lock step with all of the other, unrelated, components of the nation’s economy, has never been stated. What has often been stated is the fact that Congress, in what passes for its collective wisdom, wishes with all of its collective heart that it could drive a stake through the heart of the SGR. Every year it threatens to cut physician payment rates by 20% or more. But the Congressional Budget Office, who is charged with calculating the cost of such things, finds that ridding us of this zombie would have a ten-year cost of $139 billion (with a “b”). And that assumes that the docs get a pay freeze for those ten years. Any raises would up the cost.
In another mindless act, Congress requires itself to offset new spending with an equal amount of either tax increases or other spending cuts, or some combination. Since it’s impossible to get a majority of both houses to support either (a) tax increases in the house or (b) payment cuts in the Senate, nothing can happen, and the SGR lives on, annually “fixed” by kicking the can down the road a year, only to arise reanimated the following year.
Some observers of the optimistic persuasion believed that, maybe this time, the SGR might have met its match. We have a conference committee meeting to reconcile differences between House and Senate budget proposals, and maybe, just maybe, they would include a permanent fix to the SGR in their bargain. Any dreams of a grand bargain have long ago died, but there lingered the hope for a mini-bargain that might include the SGR. That hope is now dead, as time has essentially run out for a fix before the SGR kicks in January 1, 2014. The best one can hope for now is a repeat of the annual can-down-the-road kicking exercise.
What does this mean for Medicare Advantage? Well, actually, not much. Until this year’s political pressure enlightened the calculation of the annual increase to Medicare Advantage plans, the SGR had a depressing impact on Medicare payments to private plans. Until this year, CMS had always assumed that the SGR’s pay cuts would actually happen. They calculated payments to Medicare plans accordingly. When Congress did the inevitable, and postponed the SGR cuts by a year, CMS corrected the following year’s payments, but by then, the SGR was back and cutting more. So, over time, payments to Medicare Advantage lagged more and more as they continued to be included in the calculation and only fixed a year later. However, the 2014 rates, for the first time, include the assumption that Congress will do what it has done the past eleven years, and fix the SGR cuts, at least for one year. The rates were increased accordingly. Maybe you didn’t notice, since the SGR impact was offset by other cumulative corrections that decreased rates to make up for prior year miscalculations and overpayments. But the SGR is now gone from Medicare Advantage benchmark calculations.
So, as long as Congress keeps fixing the SGR one year at a time, there will be no impact on Medicare Advantage rates. The fix is already baked into the rates. And a permanent doc fix will also have no impact.
But the SGR is still an annoyance. Nobody wants it. Nobody expects it to ever save Medicare a dime. Everybody knows Congress will fix it one year at a time. Yet every member of Congress knows that to approve a permanent doc fix without offsetting taxes or cuts will be branded a “budget buster” by opponents, super-PACS, and tax exempt social welfare organizations all too eager to educate us on the evils of whoever is running against the incumbent. And tax increases or cuts to Medicare will provide even more fodder for election season TV commercials. So it lives on. And on.
Resources
Listen as GHG expert Bill MacBain dives in to what the Sustainable Growth Rate is, why it matters and how we can measure its impact. Access the podcast >>
Join us December 11 from 2:00 — 3:30 pm ET for a lively session with Gorman Health Group strategy and data analysis experts who will discuss actual case studies that show how plans can mine data for precious insight that can help improve performance. Register now >>