What did 11 years, 16 patches and $154 billion get us? Nothing

There are plenty of examples of wasteful government spending, but the sustainable growth rate formula is hard to top.

The saga of Congress and the Medicare sustainable growth rate (SGR) formula is a classic example of bad government. Consider this:

  • Feb. 20, 2014, marked the 11th anniversary of the first-ever SGR patch, when Congress enacted legislation to temporarily stop the SGR from cutting physician payments.
  • Congress went on to enact a total of 16 SGR patches; the current one expired on April 1.
  • The cumulative budget cost of all the patches came to nearly $154 billion. (Full repeal of the SGR is now estimated to cost less than that.)

There are plenty of examples of wasteful government spending, but it's hard to beat the SGR. Congress spent $154 billion of taxpayers' money on temporary patches that didn't get rid of the SGR, create stability in payments, improve the resource-based relative value units or fix other problems in the payment system. Instead, the patches basically froze physician payments for more than a decade without eliminating the formula that created the problem in the first place.

In a tersely worded statement issued on Feb. 20, ACP President Molly Cooke, MD, FACP, observed, “Physicians throughout America today are recognizing a truly ‘Rotten Anniversary.’” The question is, will Congress find the will to break the cycle of SGR patches and actually enact SGR repeal and permanent reform?

In many respects, the stars are better aligned for such an outcome than ever before. In January, the 3 congressional committees with responsibility over Medicare, the House Ways and Means and Energy and Commerce Committees and the Senate Finance Committee, reached agreement on The SGR Repeal and Medicare Provider Payment Modernization Act of 2014, H.R. 4015/S. 2000. The bill is strongly supported by ACP, the American Medical Association, the American College of Surgeons, the American Academy of Family Physicians, and just about every other physician membership organization in the United States, an unprecedented display of professional unity.

The cost of repealing the SGR and replacing it with H.R. 4015/S. 2000 is now estimated by the Congressional Budget Office to be $128 billion over the next 10 years, less than Congress has already spent on the 16 patches. Yet big obstacles remain.

Congress has to come up with $128 billion in budget “offsets” (cuts to someone else: beneficiaries, hospitals, nursing homes, drug companies, etc.), which is especially difficult in an election year. Congress could instead decide to pass the SGR repeal bill without goring someone else's ox to pay for it, although this requires getting fiscal conservatives to go along with a bill that technically would add over $100 billion to the deficit. Yet this is exactly what the conservative Wall Street Journal editorial page recommended on Feb. 19, writing:

“The SGR was a 1997 Newt Gingrich-Bill Clinton special to avoid the harder work of actual entitlement reform. The bookkeeping gimmick merely hides Medicare's true costs by moving future spending off balance sheet. Sometimes Congress ‘pays for’ more current Medicare spending by swearing to pay doctors somewhat less in the fabled ‘out years'—cuts that are themselves a sham and later postponed. In a word, Congress cheats. ... Welcome to the anti-reality of the sustainable growth rate. What's adding to the deficit is traditional Medicare on present trend, not how the accountants keep track of the dollars ex ante. Absent reform, one way or another the money is going to be spent, and Congress can either continue to do so in incremental doc-fix slices or admit in advance that it was always going to do it. The latter option is better as truth in entitlement advertising. Here's a suggestion: Simply pass the bill as is and forgo the pretense of fake-paying for it, if only to destroy a vehicle for even more spending.”

Another potential obstacle is whether rank-and-file physicians will rally behind the SGR repeal bill. Despite the endorsements by more than 100 physician membership organizations, some are asking whether the bill is really much better than just putting up with the SGR, knowing that Congress will probably just pass another patch to prevent the 24% cut scheduled for April 1, when the current SGR patch expires.

While it is not a perfect bill—no piece of legislation is—the SGR Repeal and Medicare Provider Payment Modernization Act of 2014 is far better than putting up with the SGR and more patches, for the following reasons.

  1. 1. The bill guarantees positive annual baseline updates of 0.5% for 5 years, versus the 24% scheduled SGR cut. If Congress decides to once again duck the issue by passing another temporary “patch” to stop the 24% cut, rather than repealing the SGR as this bill would do, past practice tells us we would get another multi-year freeze, at best—and quite likely, across-the-board cuts, while the SGR formula would remain on the books. The College would have preferred higher baseline annual updates than the bill allows, but the budget cost makes this impossible at the current time.
  2. 2. The SGR results in scheduled pay cuts no matter what physicians do, versus giving them the opportunity to earn higher updates for participating in quality improvement programs or being in a patient-centered medical home (PCMH) or other alternative payment model, as this bill would do. Under current law, all physicians get the same (negative) scheduled SGR updates.
  3. 3. The bill cancels the existing Physician Quality Reporting System (PQRS) and Meaningful Use penalties at the end of 2017, adding these dollars back to physician payments instead of paying them to the federal government.
  4. 4. It unifies the current PQRS, Meaningful Use, and Medicare Value-Based Payment Modifier programs into a single reporting program starting in 2018, creating an opportunity to harmonize measures and streamline reporting. ACP will work to ensure that the “correct” measures are used with greater harmonization, with the least possible reporting “hassles” for practices.
  5. 5. It creates strong incentives and higher payments to physicians practicing in certified PCMHs and PCMH subspecialty practices.

Legislation is the art of the possible, and the College has influenced the process to get the best possible outcome for medicine. H.R. 4015/S. 2000 is the only realistic option to repeal the SGR, stabilize payments, and create the opportunity for physicians to get positive payment adjustments by participating in programs to improve quality and lower costs.

Rank-and-file ACP members need to help us get this simple message through: After 11 years, 16 patches, and $154 billion in wasted spending, Congress needs to permanently repeal the SGR and create a better payment system for physicians and their patients.