Effects of Medicare SGR Pay Cut Could be Worse than Expected

At the end of each year, physicians wait anxiously for Congress to decide whether it will avert massive pay cuts to Medicare reimbursement due to the flawed Sustainable Growth Rate (SGR) formula.

And each year, physicians, medical associations, and the media focus on the fact that such a cut (this year, about a 27 percent pay cut is scheduled for January 1, 2013) will force many physicians to shut their doors to new Medicare patients. It could even force some physicians to gradually decrease their current number of Medicare patients.

But there’s another SGR-related problem that’s flying under the radar.

If the pay cut is not averted, Lou Goodman, president of The Physicians Foundation, told Physicians Practice many physicians may need to retire earlier than anticipated or close their practices as a result of the ongoing strain on practice finances. In turn, that would exacerbate the physician shortage and reduce access to care for all patients, not just those insured by Medicare.

The Physicians Foundation is a nonprofit that seeks to advance the work of practicing physicians and to improve the quality of healthcare in America.

“I think the summary sentence would be that people have insurance coverage access but they don’t have availability, there’s no doctors to take care of them,” he said. And he added, “Even without the [SGR] cut - the uncertainty and the cliffs we keep getting taken to - I could see a massive exit from that program and doctors finally saying I can’t keep my doors open.”

In fact, a recent report from the Texas Medical Association indicates just how prevalent a problem Medicare reimbursement already is for physicians. It found that 50 percent of Texas physicians are considering opting out of Medicare altogether.

Making matters worse, that physician retirement wave and the increasing number of physicians who would opt out of the Medicare program would come at the most inopportune time. It’s estimated that 36 million baby boomers will enter the Medicare program in the next couple of years, and about 30 million more people are expected to gain health insurance due to the Affordable Care Act (ACA), according to a recent report put forth by The Physicians Foundation.

At the same time, we face a physician shortage of up to 160,000 by 2025, according to the Association of American Medical Colleges.

So far this year, three solutions to the flawed SGR have been floated before Congress.

One of the proposals is to repeal and pay off the SGR (a cost estimated at $300 billion) by using future savings from money originally allocated to the wars in Iraq and Afghanistan. Then, phase out traditional fee-for-service with more value-based reimbursement initiatives.

However, a recent Medscape Medical News article states that, “...The high price tag of the bill, called the Medicare Physician Payment Innovation Act of 2012, makes passage unlikely in a hyper-partisan election year.”

A second proposal from Sen. Rand Paul, MD (R-Ky.), would eliminate the SGR and give physicians annual Medicare raises equal to increases in the Consumer Price Index, up to 3 percent, according to Medscape. Paul proposes offsetting the cost of his proposal by repealing the Medicaid expansion and premium subsidy payments under the ACA.

However, according to Medscape, “This bill also has dim prospects because Democrats who control the Senate have vowed to protect the ACA from wholesale gutting.”

A third proposal is put forth by Rep. Michael Burgess, MD (R-Texas), who advocates for freezing Medicare rates at their current level through 2013, according to American Medical News.

Of course, this represents only a temporary fix, similar to the temporary fixes passed by Congress year after year.

Burgess’ proposal, however, does have some appeal because the SGR issue would be taken care of before the November general election, therefore avoiding a tight, anxiety-inducing deadline like we experienced at the end of 2011.Do you think a failure to avert the scheduled pay cut due to the flawed SGR could push physicians near retirement to retire earlier than anticipated? How would it influence other physicians?