Groups want $3 billion for Medicare underpayments

Sustainable growth rate at issue

Representatives from 40 different physician specialties say problems in Medicare’s fee schedule formula have short-changed physicians some $3 billion in legitimate payments over the past two years. They have have formed a coalition to press Congress to correct these alleged mistakes.

Many Capitol Hill insiders say recovering the entire $3 billion is a long shot. However, any money the coalition is able to squeeze out of Congress will be like found money for affected physicians.

At issue is the so-called sustainable growth rate system. Enacted as part of the 1997 Balanced Budget Act (BBA), the sustainable growth rate establishes a target growth rate for Medicare spending on physician services that annually adjusts payments up or down depending upon whether actual spending is below or above the target.

"Despite the fact that Medicare spending on physician services has been growing more slowly than all other Medicare benefits, physicians are the only group subject to this target," notes Robert Doughtery, vice president for governmental affairs with the American College of Physicians-American Society of Internal Medicine in Washington, DC.

Provider groups argue that fundamental flaws in the sustainable growth rate formula have caused major errors in its spending projections.

As the Chicago-based American Medical Association (AMA) recently testified on Capitol Hill, last year the Health Care Financing Admini stration underestimated the gross domestic product by a whopping one-third. This year, the agency estimated Medicare+Choice enrollment would grow by a third, when the actual growth rate only reached 11%.

Combined, these two gaffes cost physicians some $3 billion in otherwise deserved Medicare payments, contend providers.

Bad estimates pegged as culprit

In testimony before the House Commerce subcommittee on health and environment, Richard F. Corlin, MD, said: "Physicians — regardless of specialty — are unanimous in our concern that payment cuts due to flaws in the sustainable growth rate, on top of more than a decade of previous cuts, could threaten our ability to continue to offer Medicare patients the finest medical care in the world."

Providers want Congress to cough up so-called give-backs, erasing some of the funding cut by the BBA for hospitals, skilled nursing facilities, home health, and other Part A providers. Physicians are pressing an equity argument to get the sustainable growth rate shortfall included in any budget revision bill.

One congressional champion of the campaign to revise the sustainable growth rate is Rep. Greg Ganske, MD (R-IA), who took HCFA to task at the September House hearing for not correcting the problems with the formula faster and failing to respond to provider complaints.

Changes in fee schedule sought

Providers want Congress to authorize payment of the $3 billion they say was mistakenly not included in Medicare’s physician fee schedule payments over the past two years, then implement changes in the formula already recommend by the Medicare Payment Advisory Committee (MedPAC). MedPAC’s suggested changes would:

1. Create an add-on to the sustainable growth rate formula allowing for technological changes in medicine that increase the demand for physician services.

2. Create an add-on to the formula to account for the rising cost of ambulatory care practice, brought on by the shift in care from hospital inpatient settings to outpatient sites.

3. Instruct HCFA to periodically adjust the formula to allow for changes over time in the characteristics of patients enrolling in Medicare+Choice plans compared to those remaining in the fee-for-service program.

4. Raise the lower limit on formula updates to provide a more acceptable floor on payment updates.

5. End formula projection errors by giving the administration the authority to change projections as new Gross Domestic Product (GDP) data become available or by requiring the administration to update the formula using actual GDP data.