Many years ago, the Congress established the Sustainable Growth Rate Formula (SGR) to control physician spending in Medicare. The concept is simple, if Medicare physician costs grow at a pace beyond affordability, next year's payments get cut to rebalance spending getting us back on an affordable track.
Of course, we now know that Medicare's physician costs have risen faster than the sustainable level and the Congress has overridden the formula every year. Private payments to doctors often tied to Medicare schedules have risen in tandem.
Now the docs are headed for a 21% fee cut on January 1 driven by the SGR if the Congress again doesn't act. Will they just punt again--likely cutting Medicare HMOs to pay the docs--or will they finally face up to physician payment reform?
Today, everyone says ditch the SGR because it's a disaster and hasn't controlled anything. But wait a minute, isn't the SGR just the parakeet in the mineshaft?
Pay for performance (P4P) seems to be the solution d'jour. But it won't work to control costs unless the overall physician community ends up getting less than it would have. P4P proposals without teeth are just a political sham to pay everyone more.
Here is my editorial:
Time for Hard Choices
When it comes to health care reform, one thing no one argues about is that costs will need to be cut. If President Barack Obama and Congress want to insure more people, the money will have to be spent more efficiently.
Unfortunately, however, cutting costs, especially physician payments, is going to be extremely difficult—if not impossible—to do. I have been watching the political debate among physician groups in Washington, and I've also been out in the rest of the country talking to physicians and physician groups. I have come away with the clear impression that none of them believes he or she can be paid less. All of them believe that their backs are against the wall, and that they just can't stay in business under the current reimbursement system. Where does that leave us? I don't know.
Pay for performance (P4P) is one idea that has been touted as a partial solution to our health care cost problem. It sounds like a great idea; who can argue that we should not be paying for good performance? The problem with it is that there's an elephant in the room: If you in fact pay for performance and pay more for the people who are the most efficient, you will pay less to doctors in general. P4P is a means to pay less. It has to be a means to pay less, because the Medicare program—which is currently experimenting with P4P—is headed toward insolvency in a few years. But in the P4P systems I see, it looks like everyone's a winner. Real P4P isn't going to work that way.
Another idea being suggested for changing the health care cost structure is revising the Sustainable Growth Rate (SGR) formula that is used by Medicare to calculate physician payments. But here's a question you don't hear in Washington: What's wrong with the SGR? It was created about 10 years ago to automatically pare back physician payments when the aggregate payments were unaffordable. Is it not the parakeet in the mine shaft warning us about spending too much?
I'm not saying that the SGR is perfect. But isn't it the SGR's job to tell us when the system is broken? If so, please don't shoot the messenger.
The SGR is a good example of real cost containment. Maybe Medicare got the formula wrong in terms of payments to primary care physicians vs. specialists, but in the aggregate, what's wrong with the answer it's giving us? Congress says we have to rebase it, which means “Never mind, let's give the doctors what they want.”
The SGR could be tied to a benchmark we could afford, such as the growth of the economy. If that benchmark were sufficient, we would be on track to payment reform. I don't want to defend the SGR in detail, but tying it to a benchmark of sustainability seems like a reasonable thing to do.
All this still leaves open the question of how much waste there is in health care spending. Data from the Dartmouth Institute for Health Policy and Clinical Practice show that 30% of all health care dollars are spent wastefully. We know how to fix that, but we don't want to do what we know needs to be done. Part of the solution is given in the Obama health plan—deciding which procedures and treatments are appropriate in which circumstances. A federal cost board that oversees when certain procedures are used would go a long way toward eliminating the waste. But that would get a lot of opposition from the device industry and other health care lobbying groups.
Health care reform isn't going to be easy; it involves a lot of hard choices. But we need to have the courage to do what must be done.