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Looming Straight Ahead: The SGR Dilemma

November 4, 2010
by Mark Hagland
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What happens when federal policy objectives conflict with one another?

With the November mid-term elections in the U.S. Congress over and left to the political pundits to pick over, most observers of the Washington scene are focused on what will happen when the new Congress assembles in January, and of course are most interested in whatever conflicts will inevitably erupt between members of the two major parties, once the new Congress is seated.

But before we collectively get ahead of ourselves, one of the issues that the so-called “lame duck” Congress will have to address this month is whether the current extension of the sustainable growth model, or SGR, under Medicare, will be extended yet again, and it’s a problem with immense repercussions for physicians, and ultimately for all of healthcare. If the SGR cuts take effect, it will mean a 23.2 percent pay cut to physicians as of December 1, and a total of more than a 25 percent pay cut as of January 1. (CMS had earlier projected a 29.5 percent pay cut, but on Tuesday, revised downward that estimate to a total 25 percent cut as of Jan. 1, unless nothing is done legislatively.)

Leaders at the American Medical Association and other medical groups are already organizing to try to work out some kind of patch that will keep physician pay at current levels through 2011, while planning to lobby intensively for some kind of permanent approach to staving off such cuts.

Now here’s the thing: even a 13-month patch would cost taxpayers $17 billion; and that’s a pittance compared to the cost of any long-term legislative approach to lessening what would otherwise be inevitable cuts to Medicare physician reimbursement. What’s more, both major political parties are facing a dilemma here. For the Democrats, who passed healthcare reform with bare majorities in both houses of Congress, part of what made their pitch on the cost of reform palatable was not including any addressing of the physician SGR issue in the reform package. For Republicans, of course, the mid-term campaign slogans were intensely focused on aggressively cutting federal spending. So members of Congress in both houses and from both parties are in a very difficult quandary here, since organized medicine has long been a very powerful interest group on Capitol Hill. But the continual postponement of these Medicare physician reimbursement cuts has led to a bizarre kind of snowball effect, in which the stakes keep getting higher and higher the longer the set of hard decisions around this issue keeps getting postponed. It’s like when someone takes a bicycle pump and starts inflating a balloon, and a crowd gathers to see how dramatic the explosion is when the balloon inevitably pops.

And, while all this is playing out, the meaningful use clock is ticking under HITECH. And that means that physicians in the physician office setting, who are a key stakeholder group that the federal policymakers are trying to prod into automation in order to make healthcare safer, of higher quality, more efficient, and more cost-effective, are looking at the expense involved in implementing EHRs, looking at the $44,000 per doctor they could receive from HITECH, and looking at a potentially huge Medicare pay cut, and having to sort out what choice they’ll make.

As we learned at the MGMA conference two weeks ago, fully 45.3 percent of those medical group leaders surveyed by MGMA this fall said that if major SGR cuts go through, they will delay the purchase of EHR systems. That’s huge. As William Jessee, M.D., MGMA’s president and CEO told me at the conference, he told David Blumenthal, M.D. directly, “You guys need to understand, it’s not a matter of whether our members like the EHR or not, it’s about everything going on in medical practice. And it’s hard for us to advocate this when the SGR thing could really have a negative impact.” Dr. Jessee correctly views the SGR issue as the single biggest obstacle right now to full-speed-ahead EHR implementation under HITECH. Is it fair to anyone that SGR could imperil physician adoption of EHRs under HITECH? No, of course it’s not. But in the real world of sometimes-competing policy agendas, this is a classic case study in how different priorities can jostle against each other on the federal policy level, particularly when they involve money, and particularly after a contentious federal election. As for the outcome of this complicated scenario? As they say on television, Stay Tuned.

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