‘Doc fix’ flies in the face of rewarding quality, not quantity, of treatment

One of the last things that Congress did before finally getting out of town a few days before Christmas was the so-called “doc fix” – finding money to stave off a scheduled cut for Medicare physician payments. But they only did it for two months – meaning lawmakers will come back in January and struggle with it all over again.

The uncertainly, coupled with the prospects of what, on paper at least, could be a 27 percent fee cut, raises questions about whether more physicians will start cutting back on the number of Medicare patients they take, or dropping out of the program altogether.

Joanne KenenJoanne Kenen (@JoanneKenen) is AHCJ’s health reform topic leader. If you have questions or suggestions for future resources, please send them to joanne@healthjournalism.org.

It’s also worth reflecting on what this Medicare payment system (formally known as the Sustainable Growth Rate or SGR) means – because it reinforces the very heart of fee-for-service medicine at a time when the health reform law, and many large employers and insurers, are supposedly trying to nudge the health care system away from fee-for-service, which encourages volume. The goal is to move toward new models of more coordinated and integrated care that are supposed to promote value.  So the irony is that we’re tying ourselves in knots about SGR – which pays doctors for how much they do – when the focus is supposedly on creating a system that rewards doctors for how well they do. Go figure.

The SGR dates back to one of those sprawling congressional budget deals, back in 1997. It is supposed to link Medicare physician costs to larger economic and population trends. But the formula didn’t work. Everyone in Washington has pretty much agreed on that. But they haven’t agreed on how or when to replace it. There’s been a lot of talk about coming up with a “doc fix” for a couple of years to allow time for a transition to a TBD new system. But that’s a tall order, given that all the parties don’t agree on what a new system should look like, or which of the new payment systems and incentives being tested are going to turn out to work well (and how long it may take to get them working.)

Until 2002, payments under the SGR rose modestly. Then in 2002 physician Medicare fees were cut by 4.8 percent. In subsequent years, Congress (heavily lobbied by physician groups) postponed the cuts called for by the SGR formula, or approved modest fee hikes. Now, the cumulative postponements mean that doctors face a 27 percent cut – and erasing it would cost about $300 billion over a decade. payments have grown very modestly for nearly a decade now. On top of the SGR issue, physicians and all other Medicare providers face a 2 percent cut starting in 2013 under last summer’s deficit-reduction agreement.

The Medicare Payment Advisory Commission, or MedPAC, knows a mess when it sees one.

The system … has failed to restrain volume growth and, in fact, may have exacerbated it,” MedPAC wrote to Congress earlier this year, recommending yet again that the formula be jettisoned. To a certain extent, cutting physician payments for specific services only encourages them to offer more services.  There isn’t an expert consensus on exactly how much or precisely how the SGR system stimulates more volume. But a recent New England Journal of Medicine article found that doctors in some states were digging the SGR hole much deeper than others (Florida, Texas and New York being among the major culprits). And some specialties’ “excess growth” is much more than others (these include internal medicine, cardiology, diagnostic radiology, and family practice – some of which I would not have guessed.) This doesn’t mean that fees should be slashed in some states and not others, or that family practitioners should get a pay freeze while neurosurgeons make even higher incomes. But it does suggest, as the Harvard health policy experts that wrote the NEJM piece note, that new systems, less blunt and less arbitrary, are required.

The congressional focus on short-term “doc fixes” – a decade’s worth now – blunts the momentum for permanent change. “If you are always doing a fire drill, and finding a perpetual one-year patch, it keeps you from confronting the larger mega-reform that’s needed,” Tom Miller of the American Enterprise Institute observed.

The AMA and other physician groups have warned for years that more and more physicians will stop treating Medicare beneficiaries. On an online AMA survey in 2010, one in five doctors overall, and nearly one-third of primary care doctors, said they are already limiting Medicare patients.

So while Congress struggles for a way out, it’s probably a good time to look at what physicians are doing in your state. (This AMA guide to choices doctors can make about Medicare participation may be useful.) I suspect a lot of doctors don’t quite understand what’s going on in Congress (because as we saw during the pre-Christmas impasse, Congress didn’t seem to quite understand what’s going on in Congress.)

  • Do physicians think they will actually get a 27 percent cut? (They won’t – but they may not get an increase or only a modest one.)
  • Are they preparing to drop Medicare patients or at least take fewer new ones?
  • Have they begun to understand why the system is unsustainable, and become increasingly open to alternatives including ACOs, bundling, medical homes, etc?
  • Are they coming up with any creative local solutions? Or are they just assuming that somehow the system can keep muddling through indefinitely?

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