Is the Sustainable Growth Rate the Main Problem with Medicare Physician Reimbursement?

I applaud the current US Secretary of Health and Human Services, Mike Leavitt, for being a member in good standing of the blogsphere. His Secretary Mike Leavitt's Blog is here.

Getting into the blogging kitchen, however, requires taking some heat. So I strongly beg to differ with what his latest post says about what is wrong with how Medicare reimburses physicians.

This week, the Congress will begin working on the Medicare Sustainable Growth Rate (SGR) or what people call the 'doc fix.' The doc fix is a ritual crisis brought on annually by a terrible system Congress put into place in 1997 to manage the amount Medicare pays doctors for various procedures.

Here’s how it works: Each year, the Secretary of Health and Human Services is required by law to establish a target for the rate of overall spending on Medicare Part B.

If, collectively, doctors bill Medicare for more than the target, the Secretary of HHS is then required by law to make it up on future updates.

However, the doctors just keep billing more and more procedures to Medicare and spend far more than the target.

This has gone on now for more than 10 years and Medicare has now paid so much more than the target that the formula in the law dictates that doctors receive negative updates, cutting the amount they get paid for each procedure. This year, the SGR hole is so deep the law requires HHS to reduce the future rates we pay doctors by 10%.

So, each year Congress steps in and overrides the system by instructing Medicare not to cut the reimbursement rates. Consequently, the amount that doctors get paid at least stays the same or is a little more.

Here’s an important point. When Congress overrides the law, it doesn’t fix the system or pay off the deficit which is now so large it would require nearly $200 billion to pay off the backlog.

This is a lousy system and it hasn’t reduced Medicare costs. The total expenditures just keep going up. Why? When rates per procedure don’t go up, doctors have simply done more procedures.

Secretary Leavitt correctly identified how Medicare pays for procedures as a major problem, but ignored how Medicare sets the rates it pays for procedures. Contrast his description with how Bodenheimer et al's article in the Annals of Internal Medicine explained how the disparity in reimbursement between primary care (and other "cognitive") physicians and procedural specialists came to be, and why it is important. [Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306.]

Its main points (quoting this previous post) were:

• The widening income gap between primary care and other physicians correlates with declining interest in primary care.
• Medicare's Resource-Based Relative Value Scale (RBRVS) system was advertised as a way to make reimbursement more equitable, and particularly fairer for primary-care, but it has had the opposite effect, for three main reasons
• Proceduralists are often able to learn how to do their procedures more quickly, and thus increase the volume of procedures done, while office and hospital visits can only be sped up so much.
• The process used to update the RBRVS system is biased towards procedures for three main reasons: 1. "specialty society influence in proposing RVU [relative value unit] increases," 2. the specialist-heavy RUC [Relative Value Scale Update Committee] membership," and 3. "the desire of RUC specialists to avoid increases in evaluation and management [that is, cognitive, or non-procedural] RVUs."
• Medicare now uses a formula to limit increases in overall spending. The use of this formula leads to across the board cuts in all reimbursements. Since cognitive services reimbursements were never high to begin with, and have rarely been individually increased, these cuts tend to have disproportionate decreases.

Adding insult to injury, Medicare seems to rely only the RUC for input into the RBRVS updating process, yet the RUC, which claims to be just an advocacy group sponsored by the AMA, operates in secret and even its membership is not public. Let me quote again a brilliant rant (from DBs Medical Rants) on the subject.

The story of the RUC often reminds me of conspiracy theories. They (we never really know who they are) determine the fate of the world (or at least the economy). The RUC has disproportionate power and has apparently taken a reasonable idea (RBRVS) and corrupted it. If you want to know who to really blame, it is the RUC. I blame the AMA for developing a committee which does not represent the interest of overall health care, but rather the interests of subspecialties.

I do believe that the RUC has done more to negatively impact outpatient continuity, chronic care than any single entity.

This issue deserves more attention. We must expose this problem and make it reach the national conscious. I fear that it is important but a bit obtuse. I cannot imagine a sound bite approach to the evil the RUC has wrought.

Thus, although the sustainable growth rate system contributes to excess reimbursement for procedures and the worsening squeeze on primary care and cognitive services, how Medicare relies on the RUC, and how the RUC updates the RBRVS system are far more to blame.

The rest of Secretary Leavitt's post sings the praises of electronic medical records (EMRs) for fixing Medicare's problems. Anyone who has read MedInformaticsMD's post on Health Care Renewal (see this one most recently) would realize that current health care IT is far too often badly designed, unsuitable for the health care context, hard to use, expensive, and often the cause of unintended adverse effects. It will take a great deal of clever research and design to get health care IT into a position where it can actually benefit health.

Meanwhile, replacing the RUC with a better transparent, rational, accountable alternative seems almost simple.