Tuesday, December 20, 2011

Short memories

When the health care reform bill was pending, and the Congressional Budget Office was asked to opine on its financial impact, one of the "givens" in the cost equation was the annual sustainable growth rate (SGR) formula included in the 1997 Balanced Budget Act.  The was a provision that would reduce physician Medicare rate schedules each year.  The SGR adjustment was to save hundreds of millions of dollars during the ten-year analysis period used by the CBO.  It was included in the calculation because it was a sure thing prescribed by law.

The problem is that, since 2003, Congress has postponed the rate reduction.  Each year, thousands of doctors from around the country, directly and through their trade associations, lobby hard -- and they are successful.

The SGR formula works this way:   If spending due to increased use of services by Medicare patients rises faster than the nation’s gross domestic product, Medicare must compensate by cutting reimbursement rates for physicians enough to bring spending back in line with GDP growth.  This year, the SGR adjustment would hit doctors with a 27.4 percent pay cut for their Medicare patients in January unless Congress steps in.  As noted in this Washington Post article:

Postponing the cuts . . . would cost $21 billion for a one-year delay and $38.6 billion for two years. Fully repealing the formula would add nearly $300 billion to the deficit, according to the Congressional Budget Office.

Rest assured, the cuts will be postponed again, kicking the can further down the road.

But this year, the whole thing is mixed up with the controversy about extending the payroll tax cut.  Here is an explanation from Politico that should make the whole thing clear:

After a very long Monday, House Republican leaders announced last night they would not hold an up-or-down vote on the Senate’s two-month payroll tax cut and SGR patch. Instead the House plans to take a series of mostly show votes today, including one on the motion to reject the Senate's version and instruct conferees, and another on a "majority resolution" that restates the House Republicans' priorities when it comes to a two-year "doc fix" and other parts of the year-end package. Little is certain, and GOP leaders were careful not to overpromise on the slate of votes today. Majority Leader Eric Cantor (R-Va.) said the endgame is to appoint a conference committee "so we can actually work the differences out." He added: "We can resolve this situation and the people of this country can get what they deserve — certainty on tax policy and health care policy going forward." Minority Leader Nancy Pelosi said she would not appoint members to a conference.


Peter said...

Its amazing how much stuff is in the Affordable Care Act. I read about something new like this everyday.

So if the economy doesn't grow, medicare payments don't grow? Unless congress lets them, of course. And cogress is open to suggestions that come with campaign money.

Crazy stuff.

tom emerick said...

Paul, with your permission, I'd like to put this entire posting on my blog, Cracking Health Costs.

Please keep up the good work.

tom emerick

Paul Levy said...

Go for it, Tom.

Susannah said...

It is exactly events (or rather non-events) like this that make me reluctant to even guess what the effects of the ACA will be (although as part of my job as a hospital bond analyst I am supposed to try). The provision for long-term care insurance (CLASS) dead in the water before it was ever implemented. The financial linchpin of health reform, the individual mandate, under attack as nonconstitutional. States waffling on setting up exchanges. Regulation that was actually in place before like the SGR being kicked down the road until it adds up to a whopping 27.4% cut, which I doubt will ever get instituted (can you spell "no longer accepts Medicare patients"?). And the federal government punting on defining "essential health benefits". Perhaps I should not be so skeptical, but it doesn't look like there is going to much left to implement, even if the mandate is upheld.