AMA: Repeal the flawed Medicare payment formula

ama_logoA 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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