Next Medicare Fee Schedule Deadline Approaching

With less than a month to go, the effort is underway to block the March 1, 2010 cut to the Medicare fee schedule.  On that date, a -21.2% update to the schedule is to go into effect.   Physician’s email inboxes are filling up with the standard specialty society appeals to call, click or write their legislators, urging them to block this action. 

I had predicted that this issue would be dealt with after the overall health reform effort is decided.  That prediction is likely going to be incorrect; as it appears that the SGR issue is going to have to be dealt with prior to the reform effort endgame.  The entire reform effort itself remains in critical condition as previously discussed

The buildup to the SGR deadline is ‘déjà vu all over again’, as this has come up every year, and at different times during the year when partial-year patches have been applied, as in this case.  The entire charade is tiresome and has well worn out its welcome.  The issue is that costs continue to increase, and trying to hold it back with artificial mathematical constructs such as the SGR (and the entire RBRVS scheme) will not work forever. 

Anyone with the solution should step forward.  Here are a three possibilities, and my thoughts on them, in no particular order.

Allow the cut to go through – This option is apparently off the table, but if it occurred, it would send a shockwave through all private practices and all hospital-based practices unless separate ‘carve outs’ were negotiated, something that would be unlikely to occur.  Since private payers will soon follow CMS policy, it won’t be long before a 21% revenue reduction takes place throughout the sector.  This shockwave would result in some practices closing, some merging, and some being integrated by hospitals.  A safer alternative would be to impose the cuts in small amounts over time, say 3% or so per year.  It was clear that the 2002 cut was not accompanied by a large volume drop in providers willing to take Medicare.   Whether or not that would be true in the face of multiple cuts is not as clear.  

Allow market pricing of healthcare services – This could be done by simply dissolving the RBRVS entirely (will not happen) or by allowing providers to charge above the fee schedule amounts, but capping the amount which will be paid by third parties.  This also will not happen, as the system simply is not set up for this kind of market reality after having existed for decades under the current hybrid system. 

Scrap the entire SGR and use a new method – Although this is favored by many specialty societies, the problem here is that unless market forces are allowed to act, any new system will be another over-complex system of administered prices.  Allowing the fee schedules to be attached to a Medical Inflation Index would be an improvement, but this will lead to sharper increases in cost.


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