MedPAC Offers Savings Plan to Offset Cost of SGR Repeal But Physicians Remain Concerned as NCMS Keeps Watch

The NCMS is closely monitoring the activities of the Medicare Payment Advisory Commission (MedPAC), which has increased physician concerns over its proposal to eliminate the sustainable growth rate (SGR), used to determine physician Medicare reimbursement rates.

On Tuesday, MedPAC posted draft recommendations aimed at offsetting the budgetary costs of repealing the SGR. The Commission projects savings of $233 billion as part of a ten-year overhaul of the senior health care program.

The recommendations are divided into two tiers, with Tier I offering savings of $50 billion using proposals that have been recommended previously by the Commission. Tier II projects $180 billion in savings and contains proposals from outside groups such as Health and Human Services (HHS), Office of Inspector General (OIG), Congressional Budget Office (CBO) and MedPAC staff analysis. The Commission has not voted on or recommended the items on the Tier II list.

MedPAC unveiled its SGR proposal last week, calling for a freeze for primary care and a 5.9 percent cut for all of the other specialties for each of the next three years, followed by a seven-year freeze. The Commission is expected to take up the proposal at its October 6-7, 2011 meeting. (See Breaking News: MedPAC Addresses SGR Issue, Bulletin, 9-16-11). The NCMS is closely following these developments and will be providing updates in the Bulletin and at

Click here to read the MedPAC draft recommendations (PDF – 441 pages) to offset the budgetary costs of repealing the SGR.


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  • Kerry Willis

    Dear Mr. President
    I sense that you are struggling with managing the budget and its seems that you and the MEDPAC committee are having trouble finding ways to save money and increase the value to the system of providing medical care. I have good news . It’s really not all that difficult and it can be done without cutting the throat of Doctors who are underpaid for their services by Medicare currently.
    For many years now many healthcare providers have taken advantage of a loophole in the payment rules and allowed hospitals to bill for their services. These services are identical to services provided by other physicians except that they are reimbursed at rates varying from 20-150% or more than identical services provided to Medicare beneficiaries. Apparently a long time ago, someone convinced the government that services provided in a hospital based clinic were worth more than services provided by private practice physicians and considerations such as regulatory compliance should be an allowable expense to the Medicare system. I personally think this is hogwash and we should have one fee schedule for all physicians. If I have done the math properly, a few hundred billion a year are spent on physician services and if 50% of the physicians in this country now work for hospitals then stopping this horrible overpayment will result in savings of tens of billions of dollars each year and will be more than enough to plug the SGR gap without cutting rates for physicians who more than earn their money.
    I will admit to being a simple country Doctor and high finance isn’t my forte but I believe this would help fix one of the looming problems in medicine. I am a simple man and I like simple solutions. Another problem with the current Medicare system is the gaming of the observation vs 1 day admission rules. The current system encourages hospitals to over document and stretch the rules that are used to review one day admissions. Outliers on the high end of costs compose about 3% of claims at some hospitals but approximately 12-18% of admission in hospitals are single day admissions. This low end anomaly costs the Medicare system hundreds of billions of dollars of costs each year. The RAC system seems to be having a major impact recovering these overpayments. Since I’m a simple guy , I would propose that we pay all hospitalizations under Medicare and Medicaid at observation rates if they last less than 48 hours. The savings will be large and immediate and again in the billions of dollars range.
    A similar problem is patients who are readmitted within 30 days. Eliminate the first day charge differentials for all these admissions and require a comprehensive plan for avoiding these admissions at all at each facility providing acute cae hospital services to patients. The personnel who are charged with gaming the observation rules can be refocused on managing patients for a revenue neutral proposal for the hospitals. Again the savings would amount to hundreds of millions of dollars since 20-30% of Medicare beneficiaries admitted to the hospital are readmitted within 30 days. A more reasonable rate of 10% should be easily achievable and create large savings for the Medicare program.
    As I suggested, it’s not all that hard to create savings for services that are overcompensated and continuing to pay other physicians at fairer rates. I might point out that we have studied and have established that Medical homes provide higher quality and better valued services to Medicare beneficiaries than non medical home practices. Perhaps rather than experimenting with someone’s pipedreams, we should establish criteria for being a medical home and establish a fee schedule with savings from the above suggestions to fund this change and create more savings for the Medicare system. I’m not against experiments but perhaps we should go with tried and proven rather than follow the drug induced whims of policy wonks who have no clue about how to fix the problems in Medicine. Mr. President I hope my suggestions are helpful to you and lead you to better solutions that some of the Alice in Wonderland suggestions that have been provided by other advisors to you.
    Lastly, I’d like to point out that Medicare as it has been modified and added to is a failed system. We need to reexamine the system in terms of current research and alter the program to correct design flaws to prevent costs of not being able to afford quality primary care services. Instead of a confusing 20% after meeting a deductible after allowable charges scheme, perhaps we should adopt the Federal employees and Medicare Advantage model and move to a no deductable co pay system so patients know how much they owe and offices can easily explain the charges and owed amounts to the patient. By increasing access to quality primary care we should eb able to manage conditions and avoid unnecessary costs to the system such as ED visits and emergency admissions for UTI’s and problems that can be easily managed as an outpatient. This increase in quality primary care costs should lead to a decrease in avoidable medical procedures such as cardiac services and cancer care that are largely avoidable or have the ability to be much less than current incidence rates of these conditions. I realize that we will never eliminate all problems but correcting design problems in our current system would go a long way to fixing the problems. I hope my suggestions have been useful to you. They are a result of a medical career spanning 26 years in a rural area that have exposed me to a number of experiences that have shaped my thoughts. If I can ever help you or provide further information on my thoughts to you, please feel free to contact me.

    Sincerely yours

    Kerry A Willis MD