Magazine article Clinical Psychiatry News

GAO: Medicare Payment Fix Will Raise Spending 4%-23%

Magazine article Clinical Psychiatry News

GAO: Medicare Payment Fix Will Raise Spending 4%-23%

Article excerpt

No matter what the solution is, fixing the Medicare physician reimbursement formula is sure to be a costly venture, the Government Accountability Office concluded in a report.

Modifications to the sustainable growth rate (SGR), a component in the physician pay formula that determines each year's update, could increase spending in the Medicare program by as much as 23% over the next 10 years, depending on what approach is used, the GAO projected.

Physicians have argued that the SGR system's allowance for spending growth because of volume and intensity increases--the growth rate of real gross domestic product per capita--is too low and inflexible. If physicians provide more services than they were expected to, the payment for each service or procedure performed will decrease to keep Medicare on budget.

The GAO, mandated by the Medicare Modernization Act of 2003 to study the SGR, focused on two alternatives that were aimed at modifying the system.

One option would be to end the use of spending targets--separating fee updates from efforts to moderate spending growth.

The Medicare Payment Advisory Commission has advocated for this approach, recommending that fee updates be tied to estimated changes in the cost of providing physician services.

The other approach would retain spending targets but modify the current SGR system to address perceived shortcomings. This may include resetting the targets by not requiring the system to recoup previous excess spending, or modifiying the allowance for increased spending due to volume and intensity growth.

Both options could be implemented in a way that would likely generate positive fee updates, the GAO reported.

Eliminating the spending targets would result in greater update stability and predictability. In retaining the targets with modifications, the system could automatically work to moderate spending if volume and intensity growth began to increase above allowable rates.

However, there may be a price to pay down the road.

The Centers for Medicare and Medicaid Services (CMS) projects that either of the two approaches would result in higher aggregate spending, "from 4% to 23% higher cumulative spending" over a 10-year period from 2005 to 2014, the report said. This would make it more difficult to address Medicare's financial challenges over the long term.

"Given the importance of the long-term sustainability and affordability of the Medicare program, examining the impact of spending over a longer period may be appropriate when contemplating modifications or alternatives to the SGR system," the report said. …

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