A Proposal to Pay for the Doc Fix

Feb 18, 2014 | Health Care

Last week, the relevant Congressional committees released a bipartisan, bicameral proposal to replace the Sustainable Growth Rate (SGR) formula for Medicare physician payments, which has repeatedly been modified or delayed before taking effect since 2003. Despite this agreement, much less work has been done concerning how to pay for the cost of the replacement. To fill that void, Mark McClellan, Keith Fontenot, Alice Rivlin, and Erica Socker published a proposal in Health Affairs to offset the $130–$170 billion ten-year cost of a replacement system.

Their proposal aims to use this opportunity to create better incentives to provide and use care more efficiently through rewards for coordinated care and the use of cost-sharing changes, shared savings, and other means. Their package includes a mix of savings from both providers and beneficiaries, many of which have been highlighted in the Congressional Budget Office's (CBO's) Budget Options report. Many have also received support from the President's budget, Simpson-Bowles, Domenici-Rivlin, and the Medicare Payment Advisory Commission (MedPAC). They describe their list of policies as follows:

If Congress can come up with off-sets for physician payment reform that support improvements in care as well as lower costs, the whole package could have a more meaningful effect on beneficiary care than the physician payment reforms alone.  This could assure beneficiaries and other health care providers that these savings are not just payment cuts that must be absorbed, but steps to help reduce spending through reforms that improve care.

The reforms they propose would be sufficient to pay for the cost of a reasonable permanent doc fix.

McClellan-Table-1

This package is just one way lawmakers could choose to offset the cost of a doc fix. There are many options from CBO and others that would also do the trick while also encouraging higher-quality, higher-value care. Legislators working on the SGR replacement simply need to find the political will to agree on offsets.