AMA: Repeal the flawed Medicare payment formula

AMA: Repeal the flawed Medicare payment formulaA guest column by the American Medical Association, exclusive to

Last week’s release of the final 2014 Medicare payment rule serves as an urgent reminder to Congress that there are just 28 days before physicians who care for Medicare patients will face a steep 24 percent cut caused by the short-sighted, fatally flawed Medicare payment formula — the SGR.

Year after year for more than a decade, Medicare has threatened drastic payment cuts to the physicians who care for our nation’s seniors and disabled. Unless Congress acts soon, the drastic cut to payments to physicians will take effect January 1. Congress usually waits until the last minute to stop the cut — allowing instability and uncertainty to become the norm in the Medicare system.

The good news is there is real momentum in Congress to change this fiscally foolish SGR cycle this year. The U.S. House Ways and Means Committee and the U.S. Senate Finance Committee have recently issued the first bipartisan, bicameral congressional proposal acknowledging that the broken Medicare payment formula has to go, while the U.S. House Energy and Commerce Committee has unanimously approved a bill to repeal the SGR.

The timing is right — repealing the SGR formula this year and paving the way for a more stable and innovative Medicare program would cost half as much as last year’s projection. In fact, if we eliminate the SGR once and for all it would cost less than all 15 of the previous short-term patches that Congress has put in place over the last decade to avoid detrimental cuts.

The AMA has pledged to do our part to work collaboratively to maintain congressional momentum and continue to seize every opportunity to improve the framework of the draft repeal proposal. The AMA House of Delegates, the broadest forum of physicians, residents and medical students, met recently outside Washington, D.C. and again demonstrated its unique ability to bring together voices from all corners of the profession to create a national physician consensus on the most pressing health care issues facing the nation. At the top of the agenda was repeal of Medicare’s failed SGR formula. The physician prescription for Medicare payment reform that emerged from this meeting was adopted without a dissenting vote and reaffirmed the AMA’s commitment to an improved Medicare program.

The aim of the legislative proposals now being considered by Congress is not simply to preserve Medicare — but also to make Medicare better, more innovative and more cost effective for current and future generations of seniors. Physician spending is a small part of overall Medicare spending — just 16 percent. But physicians have the power to influence total spending across the delivery system and the ability to help make Medicare overall more patient-centered with better care coordination, collaboration and continuity of care.

The popular vision of doing more with existing resources is actually possible in health care, and we can do it by creating a payment system focused on the patient — not on the payment. For example, by spending more to keep patients healthy, we can avoid costly hospitalizations.

We see the potential for greater emphasis on quality and value in a variety of new models of care delivery, including accountable care organizations, where physicians and other health care providers join together to improve care and reduce unnecessary costs. Two other delivery models showing promise are bundled payments, so providers are compensated for an episode of care rather than for each service or procedure, and patient-centered medical homes that help coordinate all of a patient’s care through one physician office.

But none of these innovations are possible if physicians are worried about drastic cuts to Medicare fees that have remained almost flat since 2001, while the cost of caring for patients has gone up by 25 percent. Innovation requires stability and investment: investment in health information technology to help share information at the point of care, investment in staff to help coordinate care, and investment in time for physicians to consult with each other about a patient’s care.

With 10,000 baby boomers aging into Medicare each day, we need to repeal the SGR and give Medicare a firm foundation so physicians can pursue delivery innovations that help improve care and reduce costs. It’s the only fiscally prudent path for the Medicare program, but the clock is ticking — Congress must act before year’s end.

Ardis D. Hoven is president, American Medical Association

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  • Dr. Drake Ramoray

    You will find very few physicians who support continuing the misguided policy of the sustainable growth rate. Probably even fewer than the number of physicians who support the AMA.

    With that in mind, and given the policies that the AMA has even admitted in this piece supports what was basically rejected in the 90′s in the form of capitation and accountable care ofprganizations, what makes you think the replacement is going to be better. What basis do you have that there is any cost savings or even better care in ACO’s on a national level. Most of the data from Medicare is decidedly mixed.

    Futhermore, none of the thought leaders have ever been able to provide a reasonable answer to how this isn’t going to hurt small and rural practices. Some of my patients have issues with transportation, and even more have limited education, not finishing high school. This doesn’t even take into account that I already have a strong negative selection bias in my practice for diabetes because I am a specialist in this field. So I’m supposed to be reimbursed and graded on the same scale as physicians with much more favorable demographics who live in the affluent suburbs who have simpler patients?

    The current proposals to replace the SGR are worse than the existing legislation, at least from a rural private practice perspective. Why is it a bundled (pun intended) deal to replace a piece of misguided legislation with another piece of misguided legislation the only option provided. Even on the surface with bundled payments I can’t bill for time. From a financial perspective I can see three simple diabetics and make more money than spend an hour seeing one complicated patients. This new plan incentivized the collection of healthy patients and dismissal of non-compliant unhealthy patients.

    I have a much much easier idea and law to enact that can drastically reduce the cost of healthcare spending. Ban facility fees. The current legislation being considered will herd doctors like me into the arms of big hospitals and mega corporations and costs will rise.

    The cynic in me say that the AMA, pharma, and government have formed an unholy triumvirate to cause just this to happen (I’m easier to control if I work for a hospital and am a slave to you’re”guidelines”. I dare the AMA to prove me wrong. I’m not holding my breath.

    • southerndoc1

      Great post. I eagerly look forward to Dr. Hoven’s prompt reply to your thoughtful comments. NOT.

  • NewMexicoRam

    I’ve heard about the “freeze” on provider payments for the next 10 years.
    It may be better for me to go back to school and learn another skill.
    And I’m 53.

  • NewMexicoRam

    Absolutely right.
    It was a HUGE mistake not using that political strength when the AMA had the opportunity.
    And now with public opinion rapidly moving to appealing the ACA, the AMA can’t even threaten to move into the GOP camp in order to solve this problem.
    I will never join the AMA. It’s bad enough being a member of the AAFP, but the AMA is bad for doctors and bad for healthcare.

  • Jess

    They need to repeal the ridiculous SGR and replace it with something more sensible, something that requires less top-down government involvement and not more. Doctors definitely need more autonomy, and patients definitely need to have the government stop micromanaging the patient-doctor relationship. Medicare itself needs fundamental reforming, too.

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