The SGR repeal bill increases physician payment by 0.5% annually. Is that a fair amount?

July 25, 2013

A House bill that would repeal the dreaded SGR formula increases Medicare reimbursement to physicians by 0.5% per year. But given that the annual increase is less than inflation, is it a fair amount?

A House bill that would repeal the much-detested sustainable growth rate (SGR) formula that determines Medicare reimbursement for physicians has begun proceeding through the law-making bureaucracy and has garnered the support of nearly 20 medical groups.

But for practicing physicians, one of the bill's key provisions has raised questions and concerns. The proposal calls for annual reimbursement hikes of 0.5% from 2014 through 2018. Payment incentives such as the Physician Quality Reporting System (PQRS) and the electronic health record (EHR) incentive program will continue during that time.

Still, it doesn't take a macroeconomic expert to realize that 0.5% annual payment increase lags inflation, which generally has hovered around 2% to 3% over the last few years.

So the question looms: Is that 0.5% annual increase an appropriate amount? The answer, of course, depends on whom you ask, but there's strong sentiment among some health policy observers that it's not enough of a boost for primary care services.

"The 0.5% does seem appropriate for non-primary care services - as long as it is closely monitored to determine its impact on patient access," said David Kinsman, a spokesman for the American College of Physicians (ACP).  "If patient access is adversely effected, then the update should be adjusted."

ACP is calling for annual increases of 2.5% for primary care services - commonly defined as evaluation and management codes - between 2015 and 2018, while holding annual updates for non-primary care services at 0.5%.

The American Academy of Family Physicians (AAFP) is singing a similar tune on primary care services, according to president Jeffrey Cain, MD.

"The bottom line is that 0.5% each year is not going to keep payments in pace with inflation, and will mean that it has to be adjusted in the future," Cain said. "Therefore, we don't think that 0.5% is enough, and we still believe that primary care services provided by primary care physicians should receive a higher rate due to the complexity involved in providing those services."

Cain pointed out a couple mitigating factors that could mean the 0.5% reimbursement hike won't be as paltry for physicians as it might initially seem. First, many physicians are moving at least in part to alternative payment models, such as the Patient-Centered Medical Home (PCMH), meaning that those doctors won't be as reliant on fee-for-service as they previously were. Second, physicians can earn up to an additional 1% more from Medicare, depending on their performance reporting.

Because the ACP and AAFP represent primary care physicians, it's easy for those organizations to stake out the position that primary care reimbursements should rise by more than 0.5% annually, while that amount is just fine for specialists.

The American Medical Association (AMA), though, is in a little bit of a tougher spot because the organization represents both specialists and primary care doctors.

That may explain why the AMA declined to specifically comment on whether 0.5% is an appropriate amount for the annual Medicare reimbursement increase. "The specifics [of the bill] are still under review," said Heather Lasher Todd, an AMA spokeswoman.

Of course, real concern about proposed annual Medicare reimbursement hikes may be a little premature for some physicians at this point, as the SGR repeal proposal hasn't even made it out of committee to a full House vote, to say nothing of its prospects in the Senate.

It's easy to reach consensus that the SGR formula is flawed and needs to be replaced, but Congressional leaders are likely to soon find out that coming to agreement on what it needs to be replaced with is a whole other ballgame.

 

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