If You Like the SGR, You'll Love the IPAB

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Cover Story - August 2010  


Tex Med . 2010;106(8):16-20.

By  Ken Ortolon
Senior Editor

Troy Creamean, DO, was so fed up with declining Medicare payments that he closed his practice and left town.

Devastated by a 50-percent drop in revenue in the past five years and facing another 21.3-percent cut this year, the plastic surgeon who specialized in head and neck cancer surgery shut down his Corpus Christi office and moved to Houston, where he now performs elective surgical procedures. That means, he says, his 18 years of experience and training are going to waste.

Not only did he drop Medicare, but also he dropped all of his health plan contracts that had rates tied to Medicare rates.

"All of my contracts, and I think most doctors' contracts, are like my TRICARE contract. It's 110 percent of Medicare," he said. "Blue Cross and Blue Shield was 130 percent of Medicare, and Aetna was 80 percent of Medicare. So when there's a 21.3-percent cut in Medicare, that effectively goes all the way across the board to 100 percent of all insurance plans."

Dr. Creamean is not alone. Already, more than 200 Texas physicians have dropped out of Medicare this year because of uncertainty over the Medicare fees resulting from the Sustainable Growth Rate (SGR) formula.

They and physicians like them across the country held widely varying opinions about health system reform, but just about all of them shared the hope that reform would finally lead Congress to scrap the flawed Medicare payment system that has driven physician payments steadily downward over the past several years.

But not only did Congress fail to replace the hated SGR formula as part of the health system reform law, it did not provide any long-term relief from this year's 21.3-percent cut in payments. Instead, it opted for a series of short-term delays.

In late June, the House and Senate finally agreed on a temporary reprieve from the 21.3-percent reduction. Congress raised Medicare fees by 2.2 percent through Nov. 30. The increase was applied retroactively for claims for services on or after June 1.

Texas Medical Association President Susan Rudd Bailey, MD, said Medicare "is still on life support. We need a brand new payment system."

Dr. Bailey said a survey of TMA members found that the ongoing cash flow problems and constant uncertainty over Medicare payments have led Texas physicians to take, or consider, some drastic steps. Nearly two-thirds will reduce the number of Medicare patients they see, 55 percent will refuse all new Medicare patients, and half will lay off staff." (See "TMA Medicare Flash Survey Results.")

"We need a rational Medicare physician payment system that automatically keeps up with the cost of running a practice and is backed by a fair, stable funding formula," she said. "I am ready, right now, to roll up my sleeves and get to work. But physicians can't do it without Congress. And our patients, your constituents, need us to work together now and get this done."

So the SGR remains in place, and the health system reform law creates a new board with the authority to cut physician fees even further, possibly on top of ongoing cuts under the SGR.

The new law creates an Independent Payment Advisory Board (IPAB) to recommend measures to reduce Medicare spending if costs exceed targeted growth rates set by the U.S. Centers for Medicare & Medicaid Services (CMS).

But Congress chose to prohibit the panel from recommending changes to eligibility, coverage, or other factors that drive utilization of health care services. That, political observers say, means the board will have only one option - cut payments.

Dr. Creamean says the IPAB "without a doubt" will drive even more physicians out of Medicare.

The only good news the IPAB holds for physicians is that hospitals, Medicare Advantage plans, Medicare prescription drug plans, and other health care professionals eventually will share the pain caused by the new panel.

TMA officials, hospital representatives, and some members of Congress say cuts enacted by the IPAB likely will devastate Medicare beneficiaries' ability to find physicians and other health care professionals to care for them.

"The only way it is going to curb utilization is that it's going to decrease the payment for services and therefore decrease access to services, because almost certainly Medicare beneficiaries are going to have trouble gaining access," said Dallas dermatologist Dan McCoy, MD, chair of TMA's Council on Legislation.

"The word I would use to sum it up would be Armageddon," added U.S. Rep. Michael Burgess, MD (R-Texas). 


Finding "Budget Certainty"

Congress funded the expanded coverage that the health system reform law promises to uninsured and low-income Americans in part with $500 billion in cuts to Medicare. But at the same time, Congress and President Obama promised seniors they would see no cuts in their Medicare benefits.

Part of that $500 million in Medicare savings came from deals the administration cut with hospitals, Medicare Advantage plans, and other health care professionals. Hospitals, for example, agreed to forego some $156 billion in what Texas Hospital Association officials called "market basket updates" over the next 10 years. Those updates essentially boost hospital payments each year based on medical inflation.

But some observers say those increases probably will not be enough to offset increased utilization in Medicare as the millions of baby boomers now nearing retirement enroll in the program over the next decade.

Darren Whitehurst, TMA vice president for advocacy, says those concerns led the Senate to add the IPAB provision to gain some measure of "budget certainty."

The IPAB will have 15 members appointed by the president and confirmed by the Senate. The law states that members must be experts in health care financing, delivery, and organizations, but Mr. Whitehurst says the president has wide latitude in determining whom to appoint. Members of the board will serve six-year staggered terms.

The board's primary focus will be on payments to Medicare Advantage and prescription drug plans and "reimbursement rates to certain other providers," according to the Congressional Research Service. And it is specifically prohibited from developing proposals related to Medicare benefits, eligibility, or financing.

The law requires the board to submit proposals to the president in any year in which the projected growth rate in Medicare spending per capita exceeds a target growth rate set by the CMS Office of the Actuary. The actuary is to set its first targeted growth rate in 2013, and the board is to submit its first payment cut proposal by Jan. 15, 2014, for implementation in 2015.

Cuts the board recommends will automatically take effect, unless Congress acts to suspend them.

From 2014 to 2017, the board must recommend cuts each year the projected rate of Medicare spending growth per beneficiary exceeds an average of the projected percentage increase in the Consumer Price Index for All Urban Consumers and the Consumer Price Index for Medical Care. Beginning in 2018, the board must recommend cuts in years when the projected growth in Medicare spending exceeds the Gross Domestic Product plus 1 percent.

Cuts would be limited to 0.5 percent in 2015, 1 percent in 2016, 1.25 percent in 2017, and 1.5 percent in 2018. According to the Kaiser Family Foundation, Medicare spending in 2009 was expected to total $484 billion.


Where's the Accountability?

Dr. McCoy calls the IPAB the "military base closure commission" of Medicare reform because it relieves Congress of having to make tough decisions about spending and coverage.

"What the bill does, in my opinion, is to give Congress plausible deniability for not properly funding Medicare," Dr. McCoy said. "It puts Congress in a position where they don't have to take responsibility for putting an adequate amount of money in the Medicare budget to fund physician fees."


Dr. McCoy says Congress simply cannot make the cuts necessary to meet its budget targets "so they're moving this outside the halls of Congress to an independent commission that will not be elected, and the public will have very little influence over who is on that commission."

Representative Burgess agrees.

"There are people who feel that Congress is way past its capability of dealing with the problems involved in the growth of government and the increases in federal spending, and it simply needs to be controlled by an outside source that is not able to be modified by Congress," he said. "I disagree with that philosophy. The House of Representatives was set up by the founders to be that group that had its hands on the purse strings."

Representative Burgess and others say the IPAB is an unelected board that will be unaccountable to the people for its decisions.

"I don't think it was the intent of the founders that you would have unaccountable unelected bodies being in charge of the federal treasury," he said, adding that Congress needs to get its arms back around the budget process and hold itself accountable for these decisions.

"But we're not going to do it that way. We're going to do it with commissions, and, as a consequence, legitimately you could ask why in the world you need the United States House of Representatives. We don't do treaties, we don't confirm presidential appointments. Our job is to be the watchdogs, if you will, of the federal purse. And, if we've handed that over, other than naming post offices, what are we good for?"


A Double Whammy?

As with many other provisions of the health reform bill, there is considerable confusion over how the IPAB will operate. And, physicians are concerned that they could be subject to double cuts under the new law because of Congress' failure to scrap the SGR.

TMA officials, ironically, say the SGR may actually protect physicians from further cuts by the IPAB. The problem, Dr. McCoy says, is it is difficult to be certain of that because "the law is so new and the regulations have not been written."

Texas Medicine submitted questions regarding whether SGR cuts would impact actions by the IPAB, as well as other questions regarding rulemaking surrounding the new board, via e-mail to a spokesperson for the U.S. Department of Health and Human Services (HHS). Those questions, however, went unanswered.

Calls on the issue to Senate Finance Committee Chair Max Baucus (D-Mont.), one of the authors of the Senate health system reform bill, were referred to Senate Finance Committee staff. Calls to the committee staff were not returned.

Representative Burgess, however, sees nothing in the law that protects physicians against cuts under both the SGR and IPAB. That may not be clear until HHS adopts final rules and regulations governing the IPAB, he says.

One thing that is clear is hospitals, home health agencies, and long-term acute care providers will not be subject to any cuts until 2020. John Hawkins, senior vice president for government relations at the Texas Hospital Association, says that deal was struck as part of the hospitals' agreement to forego the $156 billion in payment increases between 2010 and 2020.

"Part of the discussion was at least PPS [prospective payment system] hospitals would be protected from reductions in the first years of operation just based on the commitments that had already been made to finance the coverage expansion," Mr. Hawkins said. "So we've got some limit of liability there, although certainly in the downstream years we would expect hospitals to be in the gunfights."

While hospitals initially will be spared from cuts by the IPAB, Medicare Advantage and prescription drug plans will not. Jared Wolfe, executive director of the Texas Association of Health Plans, says there is concern over how the IPAB could impact Medicare Advantage plans.

"We certainly have looked at the experience of our physician friends with the Sustainable Growth Rate and probably have some concerns that Congress can pass all these rules essentially trying to force their own hand because they can't be trusted to do it on a year-to-year basis."

Mr. Wolfe says some Medicare Advantage plans could drop out of the program if any future cuts are too onerous.

"Time is going to tell how that board operates and whether they tend towards a more political action or more stuff based on data that's justifiable," he said. "But certainly, throughout the entire bill, the way it's financed the Medicare Advantage plans are taking a significant hit. And so if it becomes a point where it's just a load on or pile on that's unsustainable, then I certainly think you'll see people reevaluating their participation."


Cutting Access

TMA officials say physicians almost certainly will continue to see their Medicare payments cut regardless of whether it is via the SGR or IPAB, because Congress failed to do anything meaningful in the way of controlling utilization.

"They didn't do anything to limit the demand for services, so that's going to continue to go up and probably go up faster because of some of the things that they did in the health system reform bill, like the preventive service coverage," Mr. Whitehurst said. "So they're left with control on the payment side."

He described the IPAB as "SGR 2.0," adding that "it's going to be another heavy-handed, arbitrary approach" to cutting physician payments."

"What this board does, in some respects, is put a bull's eye on the physicians' heads," added Dr. McCoy . "There is very little opportunity for this board to make a real difference in the way health care is delivered, primarily because the only thing they can adjust in any major way is physician fees."

But Dr. McCoy and Representative Burgess say the real losers are going to be the patients, who will see their access to care diminished.

Representative Burgess says that unless the IPAB is repealed, physicians are certainly going to drop out of Medicare in greater numbers.

"Anesthesiologists, pathologists can't really pick or choose their patients. By the nature of their specialty they're held hostage by the system," he said. "But for the primary care doctor, the general surgeon, the OB-Gyn who are seeing patients in an office, they will make decisions that are rationally based on their own self-preservation. And, if they can't pay their bills with what the Medicare reimbursements become, they cannot very well afford to have the chairs in the waiting room filled up with those patients."

Dr. McCoy says he "certainly wouldn't encourage physicians to abandon Medicare," but adds Congress "has certainly put physicians in a pickle."

"Physicians do have to maintain the overhead of the practice, continue to invest in new technology, continue to recruit and provide new health care providers within their practice," he said. "By not appropriately funding those services it puts physicians in a position of being forced to decrease their provision of care, which is going to lower access. If we don't adequately fund physician services in the future, it just stands to reason that more and more physicians are going to be looking at other opportunities for delivery of care outside the governmental system."

Dr. Creamean says there is no doubt more doctors are going to follow his lead out of Medicare.

"Most of the guys I talk to are looking at how they're going to address this," he said. "So, ultimately, what most doctors are talking about in my specialty is going back to the way medicine was practiced before Medicare and Medicaid were instituted. They're going to basically accept fee-for-service plans, and the patients will have to submit their own claims to the insurance companies."

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by e-mail at  Ken Ortolon .


SIDEBAR

Aug 10 Cover Story Sidebar

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SIDEBAR

Tell Congress to Stop the Medicare Cuts

Physicians' ability to continue seeing Medicare patients is being destroyed by Congress' failure to stop a 21.3-percent payment cut that went into effect June 1 and to permanently fix the fatally flawed Medicare physician payment system.

But it's not too late for you to help save Medicare by signing an online petition urging Congress to save Medicare.

As of mid-June, more than 110,000 people had signed the petition, which is being sponsored by the Texas Medical Association and other state and national medical societies.

The petition urges Congress to fix Medicare by developing a rational Medicare physician payment system that automatically keeps up with the cost of running a practice and is backed by a fair, stable funding formula. 


August 2010 Texas Medicine Contents
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