SGR Repeal & Replacement Act

AR-307319997If there was any truth, whether by design or default, to Nancy Pelosi’s infamous quote regarding the Affordable Care Act – i.e., that Congress would have to pass it to find out what’s in it – then she could have been alluding to the reality that the ACA is much more of a framework for creating future policy through regulation than it is prescriptive on the means of enactment.  And for that – and for many of those who did read the ACA – it has taken a fair share of plausible criticism.

Now comes the SGR Repeal and Medicare Beneficiary Access Improvement Act of 2013 (introduced on December 10th of last year).  As of my writing this blog post it has overall received pretty broad support, including from two of the largest and most respected physician trade associations (e.g., the AMA and AMGA) that if you weren’t familiar with the politics behind it would be truly dumbfounding.

Without expressing an opinion on the merits of the legislation, I believe that if you have found core concepts of the ACA unacceptable, then you sure as hell can’t be comfortable with many of the concepts contained in the SGR Replacement bill. I can only guess that most folks know about as much about the latter as they do about the former – and that they take their lead from media interpretations. Or the country is so desperate to have a Congress that works constructively on anything instead of being at war, they read "bipartisan" and jump off the cliff.

My areas of experience and expertise have never included consulting to physician practices, so if I am out of my league here, I apologize in advance. But from what I do understand provided below is a summary of the bill’s key components.  You can decide whether you favor these ideas based upon what’s already been debated regarding the ACA.

Repeal of the Sustainable Growth Rate
This one’s rather easy and hard to imagine will face much controversy. Everyone I have ever met in healthcare wanted to see the SGR formula repealed in favor of a stable, sustainable approach that wouldn’t push uncertainty of physician income to the cliff on a continual basis. Economic uncertainty due to congressional inaction has been the single greatest shortcoming of Congress over the past decade.
Purpose: Create a permanent fix to the Medicare physician payment approach
Risk: It actually fails to control costs and gets debated all over again in five years

Fee Updates
From 2014 through 2018, annual updates will be 0.5%. From 2019 on the 0.5% update would continue – but there would be incentives and potential penalties under a new Quality Incentive Program.
Purpose: Recognize the need to reflect impact of very modest cost inflation
Risk: Medical inflation substantially outpaces 0.5% a year, and the alternative payment models described below fail to provide adequate compensation

Reporting System to Improve Accuracy of Relative Values
Based upon existing data, patient scheduling systems, cost accounting systems, etc., payment incentives would be provided for reporting groups (i.e., physicians across specialties and setting). While this doesn’t appear to be a mandatory requirement, to the extent compensation is available to subsidize cost reductions it will become a de facto requirement.
Purpose: Creation of a data set that can be used to incentivize and reward productivity based upon comparing relative costs and outcomes
Risk: The cost of collecting and analyzing the data far outweigh any long-term cost benefits achieved

Adjustments for Misvalued Physicians’ Services
What will the reporting system above be used for? To identify services whose relative value adjustment would result in a reduction in spending up to 1%. And, of course, this would not be a budget neutral proposition: funds would be removed from the pool of spending for Medicare physician services.
Purpose: To achieve meaningful cost savings where value being produced isn’t commensurate with cost of production
Risks: Historical measures may not be reliable indicators of true cost and methodologies for determining value could be harmfully arbitrary and/or subjective

Quality Update Incentive Program
A new QUIP reporting system would begin triggering payment incentives and penalties beginning in 2019, unless a physician or other eligible professional is already in an alternative payment model. The QUIP quality measures would replace those of the existing PQRS reporting and penalty program, though that program would remain in force. The QUIP would be used to adjust payment rates +/- 1% (or zero) based on scores relative to peer groups, and as an incentive to report there will be a 5% reduction in cost reimbursement for failure to participate.
Purpose: Provide financial incentives to improve quality while reducing costs
Risks: See above

Advancing Alternative Payments Models (APMs)
$2 billion is being advanced from the Medicare Trust Fund for the evaluation, approval and implementation of APMs. A unique bent is the Secretary of HHS must contract with an independent entity to do this rather than CMS (i.e., a privatization of the process – though certainly not beyond the realm of politicization). But the underlying idea is consistent with the ACA’s effort to incentivize innovative new payment models that lower cost and improve quality outcomes, while underwriting the means of education and ability to replicate successful models.
Purpose: To use alternative payment methodologies to incentivize greater provider collaboration and coordination
Risk: Payment incentives become misaligned with provider incentives resulting in practice choices that are not in the patients’ best interest

Encouraging Care Coordination and Medical Homes
CMS has to develop new HCPCS codes and begin reimbursing for care provided under those codes in 2015 for, “complex chronic care management services.” Of great significance here is that PAs and NPs will also be able to bill Medicare under these codes if they are able to meet criteria equivalent for physicians participating in a medical home model or similar model.
Purpose: to provide a means and mechanism to reimburse the work effort involved in providing care coordination and transitional care services
Risk: The financial incentive to push care coordination onto PAs and NPs results in overburdening and leads to worse overall patient care

Expanding Availability of Medicare Data
The bill increases access and use of Medicare claims data. This allows “qualified entities” to to sell claims data or analyses to authorized users for non-public purposes and allows qualified clinical data registries (QCDRs) access to claims data. Purpose: Streamline access, utilization and analysis of claims data that could provide valuable insights into physician practice patterns
Risk: The wrong type of data ending up in the wrong hands and thus putting patient privacy at risk

A minor detail. Means of providing revenue to fund provisions of the RSGR haven’t been thought out – or perhaps considered may be more appropriate. One idea being touted is to use the claimed savings from the Better Care, Lower Cost Act, which proponents claim will save as much as $25 billion a year. This bill also has attracted bipartisan support, but the CBO has not scored it yet – so there isn’t anything to hang your hat on there just yet. Short of something like that, however, funding will become another partisan and special interest charged debate that easily threatens to derail the RSGR bill.
Purpose: To provide the revenue need to cover costs of implementation
(HUGE) Risk: In a Robbing Peter to Pay Paul fashion Congress takes even more funding away from post-acute/long-term care providers


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Medicare Eligibility: The Next Policy Battleground

In Washington this week, discussions continue in an effort to reach agreement on a comprehensive deal that will avoid the impending Fiscal Cliff.  Healthcare remains a central part part of the debate.

While much of the attention regarding healthcare policy over the past few years has focused on healthcare providers and the economics of how those providers are paid – or not – for their services, there has been an elephant in the room all the while that most politicians and elected officials wisely seek to steer clear of: that being, policy decisions impacting the financial burden on Medicare beneficiaries.

With Democrats holding fast to collecting on what they feel the presidential election afforded them – a mandate to raise taxes on the wealthy; and with Republicans demanding real and meaningful action to lower entitlement spending, the Medicare program is very squarely in the horse trading crosshairs.   Of course, there is a lot of disagreement and controversy over whether Medicare should be considered an entitlement.

On the one hand, to the extent Medicare expenditures were funded by beneficiaries through taxation it does not fit the traditional definition of an entitlement like Medicaid or unemployment benefits.  On the other hand, given a myriad of contributing factors (e.g., most prevalently being advancements in medical technology and the accompanying impact on longevity), significantly more is spent per beneficiary today than was contributed.

According to an Urban Institute research paper, in 2011 a two-earner couple retiring  with a combined income of apx. $87,500 (defined as the average wage), would have paid about $116,000 into the Medicare program during their lifetimes.  That same couple can expect lifetime Medicare benefits of $357,000 net of premiums.  And given the current trajectory, in 2030 an average-earning couple will pay $175,000 in Medicare taxes but receive a benefit of $527,000. 


So call it what you will, in the real world where accumulated deficits are resolved through bankruptcy and/or cessation of operations, the phenomenon described above represents a significant funding gap that results in the assessment of financial burden for Medicare expenditures on a broad base of the population not receiving benefits.  That sure sounds like an entitlement, does it not?

Regardless of what it’s called, the problem with raising the age of Medicare eligibility as a policy solution aimed at closing the funding gap is that it only avoids expenditures for those seniors otherwise able to afford healthcare.  This presents both fairness and pragmatic challenges.  For those individuals in the 65 – 67 age cohort unable to pay the cost of their healthcare, some form of cost subsidy will still be required: whether that is through Medicaid, insurance premium subsidization under the Affordable Care Act or cost shifting in lieu of uncompensated care.

Those challenges are causing some members in Congress to consider Medicare means testing as a potential alternative to raising the eligibility age.  This is an idea that President Obama has also publicly supported in the past.  The approach would lower Medicare benefits as a function of income.  From a purely economic vantage this is a more efficient approach because there is a much higher correlation between the targeted  population of the policy and the desired financial impact on the Medicare program.

Means testing will not be not an easy sell politically, however, when considering the enormous amount of political clout held by that portion of the electorate to be affected.  The media monster that is AARP will almost certainly be effective in portraying any attempt to implement means testing as robbing from the vulnerable elderly.  No easy answers here, folks.

Way back in the day, I used to do a lot of work as a financial advisor and was involved in several debt restructurings.  What I learned through that experience was the best possible outcome meant having all parties involved equally dissatisfied with the result.  I wonder if that’s a scenario that anyone in Washington could possibly accept where a deal on the Fiscal Cliff is involved.




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