Proposals to Fix the SGR Include Raising Costs for Medicare Patients
The House Energy and Commerce Committee’s Subcommittee on Health held a hearing today that explored different mechanisms to fix Medicare’s physician payment system. The system, known as the Sustainable Growth Rate (SGR), is a formula created by the Balanced Budget Act of 1997 that determines Medicare payment rates for doctors who participate in the Medicare program. However, the SGR is flawed: since its enactment, Congress has taken action numerous times, and five times in the past year, to avert reductions in physician payments that now total more than twenty percent. Many doctors claim such a reduction would force them to leave the Medicare program, and policymakers are now examining long-term fixes to the SGR problem that would keep Medicare spending under control without decreasing participation in the program.
The hearing discussed mechanisms that might achieve this goal, including bundled payments, which pay for episodes of care rather than for individual services; pay-for-performance models, which pay doctors based on the quality of care delivered rather than the quantity of services; and approaches that would allow doctors to privately contract with Medicare patients to determine patients’ out-of-pocket costs for services. Currently, some proposals pending in Congress would allow for this right to private contracting. But while this would permit physicians to forgo cost-sharing for some, it would also likely increase out-of-pocket costs for many by allowing providers in Medicare to “balance bill” patients. Balance billing occurs when doctors or hospitals charge patients more than the Medicare-approved amount for a given service, and such policies would create provider access issues similar to those that would exist as a result of the SGR cuts. Care may become unaffordable to people with Medicare, and many Medicare patients may find it more difficult to find providers that accept Medicare rates as payment in full.
Many Medicare patients are not in a position to take on increased medical costs. Currently, half of all people with Medicare have household incomes below $20,000 per year, and half of the next generation of people with Medicare will have annual incomes below $27,000. Furthermore, out-of-pocket spending for Medicare patients is already burdensome and increased from 11.8 percent in 1998 to 16.2 percent in 2006.
Read Medicare Rights Center’s letter to Congress about the adverse implications of private contracting and balance billing for Medicare patients.
Learn more about the Subcommittee on Health’s hearing, “The Need to Move Beyond the SGR.”
Do you have Medicare and struggle to pay your health care costs? If so, we want to hear from you. Please share your story about the out-of-pocket costs you face.
HHS Launches Initiative to Pay Hospitals Based on Performance
Last week, the Department of Health and Human Services (HHS) released a final rule to institute the value-based purchasing program for hospitals that participate in the Medicare program. Through the initiative, which was authorized by the Affordable Care Act (ACA), hospitals that perform well on quality measures will be rewarded through bonus payments, with the goal of transforming the payment system from one that emphasizes quantity to one that focuses on quality. Quality metrics used to determine bonus payments will measure, for example, timely delivery of care for individuals who experience heart attacks, appropriate and timely monitoring of surgery patients in order to prevent blood clots, the communication of hospital discharge instructions to heart failure patients, and the cleanliness of hospital facilities. Seventy percent of bonuses will be determined by hospital performance on clinical quality measures, while 30 percent of bonus payments will be determined by patient ratings of their hospital experiences.
The program will begin in October 2012 and will be funded by reducing hospital payments by one percent and reallocating that money for bonus payments to well-performing hospitals. HHS estimates that $850 billion will be available for bonus payments in fiscal year 2013, an amount that will increase over time. The hospital value-based purchasing initiative is one of many new programs enacted by the ACA that aim to improve Medicare patient experience and care.
One such initiative is Accountable Care Organizations (ACOs), which provide incentives to groups of providers to work together to better coordinate care for patients by allowing the providers to share in savings to the Medicare program produced by such coordination. Medical Homes are another example and can serve as the primary facilitator for patient care, helping to coordinate care by, for example, working with patients to ensure that they receive the care they need and that they follow care plans. These initiatives attempt to achieve savings to Medicare by reducing the need for expensive acute services that are necessary only because primary care to treat preventable conditions was not provided appropriately. In contrast, many deficit-reduction proposals, including the House budget resolution, achieve savings by cutting benefits or shifting costs to patients through voucher programs or spending caps.
Read the HHS press release.
Read more about the hospital value-based purchasing program.
Learn more about quality-improvement initiatives included in the ACA.
For Medicare-covered services, you must first pay the Medicare Part B annual deductible, which is $162 in 2011.
After you have met your deductible, you pay a Part B coinsurance for Medicare-covered services. For doctors’ visits you generally pay 20 percent of the Medicare-approved amount. For mental health services you pay 45 percent of the Medicare-approved amount.
You may have to pay more depending on what your doctor charges and whether the doctor takes Medicare assignment:
- Most doctors who treat patients with Medicare accept assignment, which means they agree to accept the Medicare-approved amount as payment in full. Participating providers always take assignment.
- Non-participating doctors, or doctors who don’t routinely take assignment, can bill their Medicare patients up to 15 percent more (although some states have set lower amounts) than the Medicare-approved amount for most services and can request full payment up front for services.
- Providers who have opted out of Medicare can charge their Medicare patients whatever they want. They must officially opt out. These providers do not submit any claims to Medicare and are not subject to the Medicare law or state law that limits the amount providers may charge patients.
Learn more about Part B costs under Original Medicare at www.MedicareInteractive.org.
AARP has launched a national TV campaign to raise awareness about budget proposals that would cut benefits or institute triggers or caps in Medicare and Social Security.
Learn more about the campaign.