Statement On Replacing the Sustainable Growth Rate (SGR) Methodology Used to Calculate the Update for Medicare Payments Under the Physician Fee Schedule
Submitted to the House Energy and Commerce Committee
Subcommittee on Health
United States House of Representatives
February 14, 2002
The Association of American Medical Colleges (AAMC) is pleased
to submit for the record testimony to the House Energy and
Commerce Subcommittee on Health on the need to replace the
Sustainable Growth Rate (SGR) methodology used to calculate
the update for Medicare payments under the Physician Fee Schedule
("physician payment update"). We believe the SGR
should be replaced with a methodology that assures adequate
payments and stable updates for physicians who participate
in Medicare. Appropriate and stable physician payments would
ensure that Medicare beneficiaries have access to the complex
and specialized care provided by academic physicians.
The AAMC comprises the country's 125 accredited medical schools
and nearly 400 major teaching hospitals and health systems,
90 academic/professional societies representing approximately
100,000 faculty members ("academic physicians"),
and the nation's medical students and residents.
The Role of Academic Physicians
Academic physicians play a unique, multifaceted role within
the physician community, as well as within the larger healthcare
system. As experts in their particular fields of medicine,
academic physicians provide patients and referring physicians
with cutting-edge clinical expertise. Academic physicians
also educate and train the medical students, residents, and
other health professionals who will become the next generation
of caregivers. In addition, many academic physicians conduct
clinical research that generates more effective, efficient,
and compassionate healthcare for all Americans-including aging
Americans.
Because of their clinical expertise, access to innovative
technologies within teaching hospitals, and participation
in clinical research, academic physicians frequently provide
inpatient and outpatient care for patients-including Medicare
beneficiaries-with complex, multiple, or acute health problems
that can not be managed elsewhere in the community.
Working together with their teaching hospital partners, academic
physicians are vital to the delivery of essential medical
services. Over three-quarters of AAMC's teaching hospital
members (which account for just 6% of the nation's hospitals)
operate certified trauma centers in conjunction with academic
physician partners. Over one-quarter of our teaching hospital
members offer burn care, about 89% provide AIDS treatment,
and 77% deliver geriatric care (eg, treatment for Parkinson's
or Alzheimer's disease) in partnership with faculty practices.
In addition, faculty practices partner with AAMC's teaching
hospital members to provide nearly 45% of the nation's hospital-based
charity care. By comprising a significant segment of America's
healthcare safety net, academic physicians and their teaching
hospital partners assure healthcare access for the poor and
underserved-including Medicare beneficiaries who are dually
eligible for Medicaid or who are unable to pay for their care.
Flaws in the Update Methodology (SGR)
The Balanced Budget Act of 1997 (BBA) established a formula
to calculate the SGR - the "target growth rate"
for Medicare spending on physician services - that would control
overall Medicare spending while simultaneously accounting
for changes in the cost of providing care. The AAMC is concerned
that the SGR has not achieved an equitable balance between
fiscal management of the Medicare program and the actual cost
of caring for Medicare patients, including the cost of medical
inflation. Various analyses have shown that, since implementation
of the SGR, updates in physician payments have failed to rise
in proportion with increases in input prices.
Additionally, as was the case this year, the SGR's link to
the country's gross domestic product (GDP) is problematic
and volatile. While payment updates in 2000 and 2001 were
relatively large (5.4% and 4.5% respectively), the 2002 payment
update of negative 5.4% is not only a dramatic decline, but
also contrasts sharply with the previous two years.
In its March 2001 report, the Medicare Payment Advisory Commission
(MedPAC) identified similar concerns with the SGR and unanimously
called to replace the methodology, stating that it "neither
adequately accounts for changes in cost nor controls total
spending." MedPAC reiterated their concerns at their
January 2002 meeting and announced in their January 16 - 17
Meeting Brief that their March 2002 report will recommend
"replacing the SGR system, updating payments for 2003,
accounting for productivity growth outside the MEI, and revising
the productivity adjustment . . . ." The AAMC strongly
supports MedPAC's conclusion regarding the need to develop
a new update methodology that produces stable and adequate
payments for physicians.
The Impact of Stable and Adequate Physician Payments on
Medicare Beneficiaries' Access to Care
Stable and adequate Medicare physician payments are critical
to ensure that seniors have continued access to the specialty
care provided by academic physicians. Nearly one-sixth of
all physicians providing Medicare services are academic physicians.
Medicare reimbursements to academic physicians total about
$2.5 billion each year and represent up to one-third of faculty
practice revenues. In light of the fact that faculty practice
revenues, on average, represent about 35% of a medical school's
total revenue, unstable Medicare payments could jeopardize
beneficiary access to specialty care, as well as academic
medicine's core missions of medical education, research, clinical
services, and providing charity care.
As disparity grows between the costs of caring for patients
and the rates at which payers reimburse for those costs, medical
schools and teaching hospitals find it increasingly difficult
to maintain their missions. Since private payers often tie
their own rates to those set by Medicare, reductions in Medicare
payments could drive additional declines in reimbursement.
A Legislative Solution to the SGR Problem
Last fall, bipartisan, bicameral legislation, "The Medicare
Physician Payment Fairness Act of 2001" (H.R. 3351/S.
1707), was introduced to provide short- and long-term relief
from unstable Medicare physician payment updates. The bills
provide short-term relief by reducing the cut to the Medicare
physician payment update from minus 5.4% to minus 0.9% and
long-term relief by directing MedPAC to develop a replacement
for the SGR.
The AAMC strongly endorses these bills and we applaud the
Subcommittee's leadership-Chairman Bilirakis (R-FL) and Ranking
Member Brown (D-OH)-for sponsoring H.R. 3351. We are pleased
that a majority of Congress, including nearly all Energy and
Commerce Committee members, are cosponsors of the bill. The
AAMC and the deans of 86 medical schools-who have signed a
letter on behalf of their faculty practices in support of
S. 1707/H.R. 3351-thank you for your support and urge your
continued leadership to ensure that the losses currently experienced
by physicians are mitigated as quickly as possible.
In conclusion, Medicare beneficiaries-including those dually
eligible for Medicaid-rely on academic physicians and academic
medical centers to provide high quality, innovative, and accessible
healthcare. They also rely on faculty physicians to develop
the clinical advances and train the new generation of Medicare
providers that will assure a high quality of life for all
American seniors. Passage of H.R. 3351/S. 1707 is a vital
first step toward mitigating the losses currently experienced
by all physicians. The AAMC looks forward to working with
you in accomplishing the second step-devising a long-term
solution to replace the current SGR methodology and assure
adequate and stable Medicare physician payment updates.
Thank you for your consideration.
|
