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    Medicare budget presses EMR, pricing, quality goals

    Sustainable Growth Rate threatens future reimbursements


    Bob Gatty
    Washington—The $3.1 trillion federal budget for Fiscal Year 2009 that President Bush submitted in February proposed overall Medicare reductions of $196 billion over 5 years. Nothing was included in the budget to deal with the problem that is at the heart of continuing physician reimbursement cuts, the Sustainable Growth Rate (SGR) formula.

    Later in the month, the Bush administration proposed legislation to slow Medicare spending, which, the administration says, is on an "unsustainable" path. One of the strategies proposed was wider adoption of electronic medical records, but critics say there must be more funding to help make that effort work.

    Meanwhile, Congress must act to extend a temporary .5% Medicare pay raise that was enacted late last year for the first 6 months of 2008. If action is not taken, Medicare reimbursement to physicians will be reduced by 10.6% beginning July 1 through the rest of 2008, and then by another 5% next year.

    The administration's Medicare budget met with substantial disdain on Capitol Hill, where Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, declared it "dead on arrival with me and most of the Congress."

    Under the plan, hospitals would face 3 years of pay freezes followed by annual pay cuts of .65%, which led the president and CEO of the American Hospital Association, Rich Umbdenstock, to declare, "At a time when physicians are in short supply, this budget calls for cuts to teaching hospitals that prepare tomorrow's physicians."

    Rep. John Dingell (D-MI), chairman of the House Energy and Commerce Committee, said the administration's plan would "result in more state budget shortfalls, more uninsured Americans, and an even more severe national health care crisis."

    SGR: Still 'fundamentally flawed'

    Even from his own party, President Bush's budget plan took criticism.

    "One troubling area [of the budget] is physician payments," said Sen. Charles Grassley (R-IA), ranking GOP member of the Senate Finance Committee. "The SGR formula is still fundamentally flawed."

    The SGR is a complex mechanism that consists of expenditure targets, a growth rate that considers inflation and other factors, and annual adjustments to payment rates designed to bring spending in line with expenditure targets over time. That formula, left in place, would reduce fees by 4% to 5% annually for at least the next several years, according to the Congressional Budget Office. AUA, the American Medical Association, and other specialty groups have pushed hard for reform.

    Grassley pointed out that late in 2007, Congress passed the temporary .5% in-crease to replace the 10.1% scheduled payment cut, noting that it also extended the physician quality reporting system and included a 1.5% bonus payment to physicians for reporting quality measures in 2008. But he warned that if Congress fails to act by June, physicians will face severe payment cuts "and, without further action, Medicare payments to physicians will plummet in the next several years."

    The Republican senator urged reform of the way Medicare pays its providers, saying that linking reimbursement to quality of care "is one way to make Medicare a better purchaser of health care services."

    In mid-February, Health and Human Services Secretary Michael O. Leavitt warned Congress that Medicare "is on an unsustainable path," driven by projected increases in costs and in the beneficiary population. The warning was triggered by the Medicare Modernization Act of 2003, which requires the president to submit a plan to reduce Medicare spending if, for 2 consecutive years, 45% of the program's funding was projected to come from general tax revenue, rather than dedicated payroll taxes or premiums, within 6 years. Medicare trustees projected in 2006 and 2007 that this funding shift would occur.

    HHS responded by submitting legislation to Congress that includes:

    • improved health information technology, including electronic medical records (EMRs)
    • transparency of pricing information
    • transparency of quality information
    • incentives for providers to deliver, and beneficiaries to choose, high-quality, low-cost health care.

    The bill also calls for medical liability reform and would impose higher premium charges for drug coverage on beneficiaries with annual incomes over $82,000 or $164,000 for couples. Leavitt said the proposal would reduce government spending by $3.2 billion over 5 years.

    The provision to provide incentives to deliver high-quality care would require HHS to publish reports on physicians, hospitals, and health plans by 2013 for 50% of treatment paid for by Medicare.

    A key to supporting pay for performance will be widespread EMR implementation, noted James King, MD, president of the American Academy of Family Physicians. He said small group practices need financial assistance so they can afford the necessary systems. AAFP estimates that 50% of its members will have such a system by the end of this year, but most of the rest cannot afford them.

    The Bush budget provides $66.1 million, or an increase of $5.5 million, for the Office of the National Coordinator for Health Information Technology (HIT) and would keep HIT funding for the Agency for Healthcare Research and Quality at last year's $44.8 million level, money that is to be used to test HIT systems and recommend best practices. During a mid-February Senate Budget Committee hearing, Sen. Sheldon Whitehouse (D-RI) said these funding levels are inadequate, contending that widespread adoption of HIT could save $81 billion.

    Meanwhile, Leavitt says he would like to be able to use Medicare claims data to help grade Medicare providers, but conflicting court decisions in Florida and the District of Columbia make that difficult. However, he wrote in a February 22 blog on the HHS web site that the Medicare trigger legislation includes language that would allow HHS "in a thoughtful, consistent way to enhance quality improvement efforts...."

    Added Secretary Leavitt, "I think there is a potential for bipartisan action on at least this part of the legislation."

    Bob Gatty
    Bob Gatty, a former congressional aide, covers news from Washington for Urology Times.

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