Congress enacted the Sustainable Growth Rate (SGR) formula in 1997 as part of the Balanced Budget Act of that same year. Designed to limit the growth in Medicare spending for physician services, it is tied to projected growth in GDP.
The problem is that changes in the country’s overall economic activity do not reflect the actual cost of providing medical care. While not as interesting a news item as the missing Malaysian airliner, Congress is currently trying to repeal this flawed formula, which will help keep physicians in business.
Let’s look at the past five years. GDP per capita was the same in 2013 as it was in 2009. Yet real inflation, including food and energy prices, is eight percent. A gallon of gas, when President Obama was first elected, was $1.87. Today a gallon of regular gas costs over $3.50. Clearly it costs more to run a business, including a medical practice, in 2013 than it did in 2009. Yet under the SGR formula, physician payments remain static.
Last week, the House passed legislation to repeal the SGR, but tied it to a delay in the individual mandate, which requires everyone to either purchase an approved insurance policy or pay a penalty. Passing 238-181, this bill demonstrated a rare bit of bipartisan agreement on an otherwise divided subject. Predictably Harry Reid and his merry band of partisans in the Senate have declared this bill dead on arrival. The president, who once called for an end to partisan politics in Congress, threatened to veto the SGR repeal, just in case Senator Reid drops the ball in the Senate.
The House bill pays for elimination of the SGR formula by using a new payment scheme, tying physician payment to quality measurements, a new paradigm in physician payment toward “value-based healthcare.” The Senate, if they do anything, will likely pass a bill with no means of paying for the cut, which is unacceptable to the House.
If this bill dies on the road from Speaker Boehner to Majority Leader Reid, physician payments under Medicare are axed by 24 percent on April 1. How realistic is this? Not very. Congress will provide another display of statesmanship and deliberation by “kicking the can” down the road one more time, as they have done year after year since they passed this formula in 1997. Seems they were “for the SGR formula before they were against it.”
Why are the Senate and White House against a delay in the individual mandate? Good question. Last week the administration quietly delayed the mandate for millions of individuals facing a number of vague “hardships” which only have to be documented “if possible.” Conveniently this delay runs until 2017, when this mess becomes the next president’s headache, and only two years less of a delay than proposed by the House. Yet supporters of the president told us repeatedly how important it was to have an individual mandate. So which is it? Depends on who suggests the delay. Democrat – OK, Republican – no way.
Neither political party is complaining about the cost of repeal, about $116 billion. Actually only a theoretical cost as the slated 24 percent cut in physician fees will be kicked down the road once again. Like complaining about the cost of a new car, which you consider, but never actually buy. And far less than wasted government money for failed green energy initiatives, as one of many examples of wasteful spending.
What if the cut does go through? The average medical practice has 60 percent overhead. Cutting revenue by 25 percent (SGR cut) pushes overhead to 80 percent, into the death zone for survival of a medical practice.
So the drama continues, sending physicians and their practices to the gallows once again, with a stay of execution at the last minute. The last reprieve was on December 31, a few months ago, with the next execution set for March 31. What a great way to treat physicians. Not to mention physician practices, mostly small business that need financial predictability and stability in order to function. 42 percent are already unhappy with their jobs. Think about that next time your life is in the hands of one of the unhappy ones.
Brian C Joondeph, MD, MPS, a Denver based physician, is an advocate of smaller, more efficient government. Twitter @retinaldoctor.