As physicians lobby Congress to replace the Sustainable Growth Rate without paying for the fix, the think tank Center for a Responsible Federal Budget published Wednesday (Nov. 19) a plan to pay for Medicare physician-pay reform using policies that generate half of the savings from providers and half from beneficiaries — beneficiary policy changes would reduce out-of-pocket costs, the report states. The plan combines a package of SGR replacement and so-called Medicare “extenders” with a tax-reform plan for dealing with a separate group of 55 tax breaks for businesses and individuals, which also are called tax extenders.
Provider offsets for SGR reform include expanding bundled pay ($40 billion), changing Part B drug reimbursement ($10 billion), reducing readmissions ($10 billion) and paying equally for similar services regardless of where they’re provided ($20 billion).
The beneficiary offsets include simplifying cost-sharing, reducing cost sharing for poor seniors, restricting first-dollar coverage in Medigap plans and encouraging retirees to cash out employer supplemental plans in exchange for premium subsidies. The combined savings of beneficiary offsets also equal $80 billion, but CRFB doesn’t itemize them.
CRFB would glean $10 billion in Medicaid savings by restoring the provider tax threshold to 5.5 percent.
The center is pushing to combine SGR- and tax-reform recommendations because the two issues came up at the same time and because combining the two creates more chance for a compromise, said Loren Adler, a research director at the Center for a Responsible Federal Budget. Physicians and many lawmakers want to pass the bipartisan SGR bill before the end of the year, and tax extenders must be dealt with by the end of the year. However, the current SGR patch doesn’t expire until March 31, and Adler said the center’s plans for SGR and tax reform could be separated.
“If policymakers address these two issues irresponsibly, they could add up to $1 trillion to the debt over the next decade,” CRFB says. “Yet policymakers could also use these moments to make a down payment toward tax and entitlement reforms that slow health care cost growth, speed economic growth, and help put the debt on a sustainable long-term path.”
The center’s plan assumes that the bipartisan SGR bill, plus Medicare extenders, will cost $170 billion. Senate and House lawmakers agreed earlier this year on a plan to replace the SGR, but they couldn’t agree on how to pay for it. Although the SGR policy was identical in the bills drafted by the two chambers, the Senate included Medicare extenders, and the House did not. House lawmakers planned on including extenders, but they didn’t decide on which ones, and it’s not clear which extenders would be included were Congress to pass SGR legislation during the lame duck session.
There is little time for lawmakers to move forward on SGR reform because they plan to leave town after Dec. 12.
The center says bundling pay would discourage hospitals and post-acute care providers from providing redundant and low-value services. The center calls for bundling pay for hospital stays and 90 days of post-acute care for a number of conditions. The plans also calls for using pay bundles to identify overpayments in post-acute care.
The Part B revamp would do away with incentives for administering the most expensive drugs. Medicare pays physicians 6 percent of drugs’ average sales price to cover the cost of administering those drugs — sequestration lowered that to 4 percent. That system encourages doctors to administer the most expensive drugs so the center suggests paying doctors a flat fee that is equal to an average of 3 percent of ASP.
The Affordable Care Act included a hospital readmission program that penalizes hospitals for high rehospitalization rates for certain medical conditions. The Center for a Responsible Federal Budget suggests increasing penalties and applying them to more medical conditions and types of providers.
Site-neutral payments also make the list of recommended offsets, although the proposal is limited to services provided in hospital outpatient departments and physician offices. Medicare often pays different rates for similar services based on the type of facilities that provide them. The center’s plans would set pay at the lowest cost level for certain services, which the group says would save money and remove a key incentive that has led to hospitals buying freestanding physician practices.
The center hopes to glean $80 billion by simplifying cost-sharing, reducing cost sharing for poor seniors, restricting first-dollar coverage in Medigap plans and encouraging employees to cash out their retiree plans in exchange for premium subsidies.
The center also calls for changes to Medicare Part A and Part B, which currently have varying deductibles, coinsurance and copays. The center calls for creating a combined deductible of about $600 and combined coinsurance of 20 percent for most services. The proposal would limit out-of-pocket cost to about $6,000. The center states that the details could be adjusted and the important thing is to simplify cost-sharing, encourage cost control and protect seniors against catastrophic health costs.
The plan also would reduce deductibles and out-of-pocket maximums for poor seniors, while keeping the cost-sharing structure the same, and it would charge wealthy seniors 5 percent co-insurance up to an additional $2,000 of costs above the standard out-of-pocket limit.
Catastrophic caps would make reforming supplemental insurance easier because seniors would no longer need Medigap for catastrophic coverage. Many policymakers say supplemental insurance drives up spending by removing disincentives to seek low-value services — but seniors’ advocates say there is no proof that supplemental insurance encourages overuse of services and most people who buy it, need it. The center suggests prohibiting Medigap plans from covering new deductibles and allowing them to cover only half of additional out-of-pocket costs.
Likewise, the plan would encourage retirees to drop supplemental insurance by letting employees cash out the value of those plans in exchange for premium subsidies. It also would hike Medicare premiums for those who continue to use wrap-around insurance with first-dollar coverage.
The plan suggests $10 billion could be saved by restoring the provider tax threshold to 5.5 percent. To get more from federal matching, many states inflate Medicaid costs by taxing health providers, then they redistribute that money right back to providers. In 2011, the limit on this practice was raised from 5.5 percent of net patient revenue to 6 percent.