SGR is curveball in budget debate

‘Inside baseball’ discussions focus on the baseline

WASHINGTON – It is believed that in its deliberations on how to reduce the federal deficit, the Joint Selection Committee on Deficit Reduction is considering permanently fixing the Medicare sustainable growth rate (SGR) formula. Many within the medical community have vigorously urged the super committee and Congress to repeal the SGR, and the Medicare Payment Advisory Commission (MedPAC) voted to recommend a repeal to Congress.

“Virtually everyone in Congress is on the same page of recognizing that it’s necessary to repeal this flawed, antiquated system,” said Miranda Franco, a government affairs representative for the Medical Group Management Association. “It’s just an issue of how do you pay for it? It’s a really large price tag and it’s a really large price tag in the middle of a very fiscally challenging environment.”

Those closest to the larger budget debate have engaged in “inside baseball” discussions about the SGR and the question of what is the budget baseline. The Congressional Budget Office’s current law baseline is based on the 29.5 percent Medicare payment reduction to physicians taking effect as scheduled on Jan. 1, 2012.

In President Obama’s budget deficit plan, the baseline is changed, said Ken Perez, healthcare policy team director at MedeAnalytics. “They’re moving the baseline up to assume an SGR repeal, which means a $300 billion increase to outlays and therefore the assumption is that that will be the starting point and that also there will be either offsets to that or a budget exposure,” he said.

“In the case of SGR, if you assume current law, then virtually anything you do is going to be a spending increase in Medicare, which means that makes the (super) committee’s job harder. So with respect to SGR you really want to use current policy as the baseline,” said Henry Aaron, healthcare expert and economics studies senior fellow at the Brookings Institute, a think tank based in Washington, D.C. “If you use current law things get very dicey.”

Aaron is not optimistic about the likelihood of an agreed-upon deficit fix. He believes a sequester is in the offing and that Congress will implement another temporary extension to put off the Medicare payment reduction faced by physicians. “It just makes the problem larger next time around and that is not desirable, but we’re going to have an election in little over a year that may or may not decide some things, but whether it decides things or not, it’s a reason for putting off decisions until that event has occurred,” he said.

Another temporary fix is frustrating for physicians, said Lynda Young, MD, president, Massachusetts Medical Society. Issues like whether or not they will be able to pay staff, take Medicare patients or remain in private practice are left hanging over their heads.

“When (policy makers) talk about all these debt ceiling things and the things that they’re going to cut, they’ll say they’re not going to touch Medicare benefits,” she said. “Well, what good are the benefits if there’s nowhere to go with them?”