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The SGR Fire Sale: The Time to Fix Medicare Is Now

Medicare’s current state is not sustainable, and we must address it to help revive the larger U.S. fiscal environment.  The good news is that we have an unusual opportunity to act at a lower price to the nation since the Congressional Budget Office recently announced the “bargain price” of only $138 billion to repeal the Sustainable Growth Rate.  This has certainly spurred a lot of activity on Capitol Hill related to Medicare reform – three hearings last week alone.

Healthcare policies are stuck in the past

Almost one in three Medicare beneficiaries today is covered by a fee-for-service (FFS) plan that has not changed since the late 1950s – the days when beehive hairdos were all the rage and people couldn’t get enough TV dinners.

Another vestige that has not kept pace with healthcare today?  The Sustainable Growth Rate (SGR), which was part of the Balanced Budget Act in 1997, woefully underestimated the rate at which healthcare costs would increase.  Since then, Congress has had to repeatedly – sometimes more than once in a year – “patch” the SGR with legislation to avoid massive cuts in physician reimbursements. But no one has tried to permanently fix this problem.

The SGR’s ambiguity has wreaked havoc among Allscripts’ physician clients.  Many clients want to apply the latest health IT solutions to optimize care and comply with Affordable Care Act payment reforms, but they are hesitant to adopt new solutions without certainty about their income from the Medicare program.

Now, many in Congress are proposing solutions, and a common refrain is “pay for quality.”  Before we can shift Medicare to sustainability and replace the SGR with something that reflects healthcare delivery in this century, however, Congress must address some big questions.

What does “quality care” mean?

It is clear that not all healthcare stakeholders agree on what quality is. But if we are going to pay providers based on outcomes, we’ll need a standard set of quality measures.

  • How do we choose quality measures that will fairly reimburse providers in all care environments and specialties, while also reflecting new medical discoveries?
  • How do we measure the value of work done by a team of providers caring for a patient in this new world of health information exchange?
  • How will we – providers, technology developers and experts from the National Quality Forum (NQF) and the Agency for Health Research and Quality (AHRQ) – develop, test and implement what will likely be thousands of new measures?

The new quality measures must be standards-based and consistent across programs from CMS, state Medicaid agencies and private payers, which will make it easier to aggregate data and holistically evaluate care in this country.

And how much quality can we afford?

This re-engineering isn’t just about increasing quality or containing costs.  It’s about finding value. In redirecting the cost curve for healthcare in this country, we must recognize that not every outcome is worth the expense.

For example, what if doctors could prevent all colds, but it would cost $1 million to treat each patient? Is that worth it?  Maybe a FACA that would act transparently and operate by consensus, similar to the Health IT Policy and Standards Committees, could tackle this one…

Final thoughts

Congress, it’s time to permanently repeal the SGR and replace it with a new payment and delivery paradigm that rewards good healthcare value.  It’s time to stress quality over volume and develop a model for the private insurance industry, too.  And it’s time to reward providers for improving the health of America’s seniors, the disabled and those with chronic issues, while reducing federal spending on unnecessary and uncoordinated care.

And remember, it’s a bargain right now at $138 billion!

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