A decade ago, a Medicare payment formula known as the Sustainable Growth Rate (SGR) was the source of repeated annual crises for physicians who treat Medicare patients. Manufactured out of the Balanced Budget Act of 1997, the goal of the SGR was to limit the growth in Medicare spending to keep it in line with inflation. Under the SGR, if overall physician payment costs exceeded target expenditures, a cut to Medicare physician payment was triggered.
Rather than serving to reduce Medicare spending, the SGR came to exemplify the idiom of “kicking the can down the road” when 18 times over 13 years Congress acted at the last-minute to delay a series of mandated cuts. It came to be known as the “Doc Fix.”
Before the SGR was repealed and replaced by the Medicare Access and CHIP Reauthorization Act (MACRA) in 2015, the sum of the unfunded delays in cuts to physician payment was estimated at 21.2%.
MACRA was well-intentioned but has not been successful. MACRA’s Merit-based Incentive Payment System (MIPS) was included as a substitute for the SGR to slow the growth in Medicare spending. In broad context, MIPS focuses on four areas that are largely outdated, non-cohesive, burdensome to report and often not relevant to actual clinical activities of patient care. And, MIPS reporting is arduous and costly in terms of time and treasure, being estimated at 200 hours and nearly $13,000 per physician, per year.
In addition, under current Medicare physician payment rules, any changes in policy must be budget neutral. When changes, like the addition of new procedural codes or increased payments for certain services, are anticipated to increase overall spending more than $20 million, an across the board cut to physician payment is triggered … reminiscent of the SGR.
Though MACRA was intended to do away with the annual “Doc Fix, a combination of changes to Medicare physician payment policy have effectively resulted in a series of déjà vu payment cuts every year since 2021.
Furthermore, Medicare physician payment is not annually adjusted for inflation as are the payments to other Medicare providers, like hospitals. The impact of this rule is documented in an analysis of Medicare Trustees Data which shows that Medicare physician payment has declined by 29% since 2001 when adjusted for inflation.
This is simply not sustainable, and it has profound negative implications for physicians by making it increasingly difficult to maintain small business practices. The financial realities for physician small business practice are at the root of the increased number of physicians who are now employed by hospitals and healthcare systems as well as the market consolidation of those healthcare systems into larger and larger corporate entities. This, in turn, has profound negative implications on access to care, particularly in rural areas.
To be sure, the current Medicare payment system is not only financially unsustainable, but it is also duplicitous and blatantly unjust on its face in that it provides an annual inflationary update to hospitals and other providers, but not to physicians.
The singling out of physicians is illogical. Physicians face the same inflationary pressures as do hospitals and health systems. However, they are also arguably in a worse position to shoulder the impact. In my opinion, the very existence of this double standard is rooted in the imbalance of power that large hospital and healthcare systems hold compared to the disjointed interests held by physicians who, because of cumulative economic and administrative pressures, are being forced into employment with those same hospitals and healthcare systems.
Unfortunately, our elected federal representatives are behind the power curve. It is well past time for Congress to take thoughtful, deliberative action to substantially revise the entire Medicare payment system. Because of the cumulative harmful effects of the current payment scheme, the necessary remedy will be layered and span over the concluding days of the 118thCongress while leaving further heavy lifting for the 119th.
The acute need is for Congress to take action to implement another remedy reminiscent of a “Doc Fix” before the end of 2024. Members of the House GOP Doctor’s Caucus have offered legislation to do just that. However, even if that effort effectively provides remedy for the 2024 cut, the truly challenging legislative work, e.g. that work requiring the most leadership and political courage to undertake and bring to fruition, will remain.
The good news is that the broader solution is relatively straightforward. Congress must remove the budget neutrality requirement for Medicare physician payment and provide those payments with an annual inflationary adjustment. Concurrently, Congress should work with the physician community to develop and implement updated performance metrics for physician payment that are LESS of an administrative and financial burden and are MORE relevant to patient care, the patient experience during care and which accurately reflect the quality of care.
Should the new Congress fail to undertake a thoughtful, substantive, and comprehensive overhaul of Medicare, (thereby reimagining the way it pays ALL types of providers), I believe the result to be clear, albeit dismal and unacceptable. Without necessary action, there will be more consolidation in the healthcare economy, the small business practice of medicine will become extinct, and access to care issues in rural areas will continue to deteriorate. Unfortunately, I believe this will also serve the interest of the misguided voices who advocate for a single payer healthcare system. It is entirely possible that it could add even more voices to that ill-advised chorus. From the perspective of this surgeon, that type of healthcare system does not serve the interest of patients. Therefore, failure is not an option.
Dr. Bailey is the Director for Healthcare Policy at the Goldwater Institute. A board-certified pediatric surgeon and a member of the State Bar of Montana, he recently returned to Arizona after a decade in Washington, DC where much of his work focused on Medicare physician payment.
