Yet another short-term ‘doc fix’, but with glimmers of hope

Earlier this week, House leaders approved a 12-month short-term patch to prevent looming physician payment cuts that would threaten access to needed care for millions of Americans.

Another short-term ‘doc-fix’—or legislative repair made to the broken Medicare Sustainable Growth Rate (SGR) system—did not come as a surprise, but carried substantial frustration and disappointment. Over the past year, Congress has made great strides toward a permanent fix to the dysfunctional SGR system. In 2013, bipartisan and bicameral legislation was released to repeal the SGR formula and replace it with a period of stable updates to provider payments. It also included provisions to incentivize the movement of providers away from fee-for-service reimbursement and into value-based payment arrangements, such as Accountable Care Organizations. In the end, none of the bills came to full chamber vote.

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There was a broad sense of optimism around a permanent SGR fix last year. A favorable score from the Congressional Budget Office (CBO) and unprecedented cross-chamber and cross-party collaboration made passing a full repeal a no-brainer. However, without consensus on a solution to cover the law’s $180 billion price tag before December 2013 recess, a 3-month patch landed us to where we are today: yet another patch.

The patch bill, which passed the House of Representatives on Thursday, March 27 and will likely pass through the Senate next week, is expected to be signed by President Obama. The bill is nearly identical to the majority of other SGR patches passed by Congress in recent years (all 16 of them). Though it has not yet been scored by the CBO, the House legislation will cost approximately $20 billion, and offsets include the following:

  • Value-based purchasing for skilled nursing facilities
  • Linking fee schedule rates for clinical laboratory services to reported commercial rates
  • Cuts to CT services by physicians and outpatient departments using outdated CT scanning equipment
  • Applying $2.3 billion accrued from the “Transitional Fund for SGR Reform” after an extension of the Medicare sequester 
  • Delaying the inclusion of oral-only drugs in the bundled payment system to 2024
  • Cuts to mis-valued codes in the physician fee schedule
  • Reallocation of the Medicare sequester for 2024

Though certainly better than providing insufficient or no offsets to cover the cost of the bill, the final point—the reallocation of the Medicare sequester for 2024—was described by the Committee for a Responsible Federal Budget as a “gimmick.” It covers a portion of the bill’s cost by simply moving the savings set to accrue from the Medicare sequester in 2025 to 2024. Therefore, it has no impact on the overall national debt.

While imperfect and not the permanent fix that we hoped for, the authors of the bill included a number of provisions not typically included in SGR legislation, but that offer glimmers of hope for further progress in healthcare reform. A number of these policies were recommended in March 2013 by the National Commission for Physician Payment Reform and hit on important areas within healthcare. Furthermore, their inclusion illustrates that the SGR patch is one of the few legislative vehicles that has bicameral and bipartisan viability and therefore has a high likelihood of passing out of both chambers and being signed by the president.

Rife with controversy, under the two midnights rule, Medicare will not reimburse hospitals under Part A for admitted patients that spend less than two nights in the hospital; services would be considered outpatient and billed at lower rates under Part B. This type of financial pressure could undermine safe practices and medical decision-making, and providers and health systems have not yet had enough time to develop procedures to address the new policy.

Next, quality improvement is a necessary feature of any value-based payment and delivery system, yet there is a paucity of robust measures for pediatric populations. Moving the needle forward on generating consensus for quality measurement in children will allow for better care at lower costs.  

In the insurance and payment space, the bill delays the nationwide conversion to ICD-10 diagnostic and procedural codes. It is likely that payers and providers alike needed additional time to develop and implement the IT infrastructure to make the smooth transition to the new system. The bill also eliminates the cap on deductibles for employer-sponsored health plans.

In the wake of numerous mass shootings in recent years, the system’s failure to provide and reimburse for drastically needed mental health services should remain at the forefront of the health policy agenda. Progress seen here, with promoting community-based mental health services and creating funding for outpatient treatment programs is a welcome and essential first step.

Finally, the maintenance of pediatric residency slots has been a topic of great interest in recent years. Increasing the number of slots and funding for graduate medical education (GME) in pediatrics is sorely needed, since investing in the health of children can yield great returns for better health and lower costs long-term. Further, in order to receive funding for children’s hospitals GME, sites must submit funding proposals annually, which generates anxiety around the number of slots available in any given year. This bill commissions a GAO report to explore children’s hospital GME payment.

Without a doubt, this year’s progress made on the SGR generated momentum for a future system that does not involve staggering from patch to patch each year. Despite another short-term fix, this bill does take strides to move forward on healthcare reform, and with continued physician leadership, we may yet see a permanent SGR fix.

Patel is managing director and fellow at the Engelberg Center for Health Care Reform at The Brookings Institution; Nadel is a research associate at the center.