Delays in SGR Cuts to Cost $271 Billion

By David Pittman, Washington Correspondent, MedPage Today

Published: August 01, 2012

WASHINGTON -- The Congressional Budget Office (CBO) has released updated figures on the cost of repealing -- or continuing to override -- the cuts doctors are scheduled to receive under Medicare's Sustainable Growth Rate (SGR) reimbursement formula.

The fresh numbers give Washington lawmakers a better idea of the effect of changes they could make later this year to the SGR cuts. Physician reimbursements are scheduled to drop by 27% next year unless Congress acts, the CBO noted in the report. Every year since 2003, Congress has acted to override the SGR cuts by either maintaining or increasing payments when they were scheduled to drop.

The CBO estimates that if cuts are blocked and payments sustained at current rates from now through 2022, it would cost an additional $271 billion from 2013 to 2022. Resetting payments to 2011 levels, only to increase them annually at 2% plus however much the gross domestic product (GDP) grows, would cost an additional $376.6 billion.

The agency also estimated the cost of Congress allowing the SGR cuts all at once -- dubbed the "cliff option" -- or slowly over 10 years -- what it calls the "clawback option." Each plan comes with increasing payments or keeping them flat for 1, 2, or 3 years.

But physicians shouldn't expect any dramatic changes with the payment schedules, says Robert Laszewski, health policy consultant and president of Health Policy and Strategy Associates in Alexandria, Va.

The holdup, he says, comes from the lack of a replacement to the SGR formula. Even after more than a decade of trying to wrestle with an alternative, no consensus exists on what to replace it with.

"What is the solution anyone has proposed?" Laszewski told MedPage Today in an interview. "There are no fixes on the horizon."

Glen Stream, president of the American Academy of Family Physicians (AAFP) in Leawood, Kan., agrees with the feeling that Congress will delay by 6 to 12 months the cuts scheduled to take effect at the beginning of next year, he told MedPage Today in an interview.

Looking toward the long term, the idea of scrapping the SGR entirely has recently gained the support of at least some members of Congress. However, the legislation hasn't gotten far.

Rep. Allyson Schwartz (D-Pa.) has proposed a bill, the Medicare Physician Payment Innovation Act of 2011, that would eliminate the SGR, instead slowly reducing physician payments after 5 years.

The AAFP supports the bill. The American Medical Association also has called for eliminating the SGR.

While Congress continues to wrestle with the SGR issue, AAFP continues to advocate physicians creating higher-quality, more efficient practices. But "that's hard to do when you don't know if these cuts will come into effect," Stream said.

The Medicare "doc fix," as it is commonly called, is one item expected to be addressed in a lame duck Congress when lawmakers return to Washington after the November elections.

The Medicare Payment Advisory Commission (MedPAC) has since October 2011 called for a reform of the SGR formula. Its proposal, first outlined in October 2011, calls for freezing payment rates for primary care services at their current levels for 10 years. For all specialties, MedPAC recommends a 5.9% reduction for 3 years, then a freeze for 7 years.