MedPAC: It's time to either scrap Medicare pay formula, or expand it

Replacing next year's predicted 9.9% cut and subsequent reductions with cost-based increases would run more than $260 billion, the Congressional Budget Office says.

By David Glendinning, AMNews staff. March 19, 2007.

Washington -- A divided Medicare Payment Advisory Commission offered one way Congress might address flaws in the Medicare physician payment system without ditching its expenditure targets. However, the proposal got a frosty reception from physician organizations and lawmakers alike.

An eagerly awaited MedPAC report on alternatives to Medicare's sustainable growth rate formula arrived March 1 on Capitol Hill along with the panel's annual report on how the program should pay all of its participants next year. Although commissioners had hoped to unite behind a single set of long-term reform recommendations, they could not agree on whether to retain the formula's annual spending limits that are designed to keep expenditures in check.

"Alas, in this particular case, the SGR, it has not been possible for us to forge a consensus within the commission about what to do," MedPAC Chair Glenn Hackbarth said the same day at a Senate Finance Committee hearing on the reports.

In lieu of recommendations, the panel offered two distinct "pathways" for Congress to consider. The first option would completely scrap the sustainable growth rate in favor of a calculation that reflects physician practice costs. The second one would expand over time the formula's spending limits to all of Medicare. If they followed the latter pathway, lawmakers first would adjust the limits based on physicians' geographic areas and eventually would transition hospitals, nursing homes and others into the mix.