The best example of the longstanding flaw in Medicare's cost-control efforts is the Sustainable Growth Rate formula
By Frederick M. Azar, MD
After five years of slow growth, health costs are expected to rise as much as 6.8 percent next year. This forecast is sure to energize Washington lawmakers who have long sought to slash health spending, particularly within Medicare.
Efforts to cut Medicare have typically focused on the quantity and cost of treatment, with little regard for the quality of care.
That’s a mistake. Such a single-minded focus on the bottom line has compromised quality for millions of seniors without delivering the sought-after savings. Our leaders must adopt a new approach to Medicare reform that considers value, not just cost.
The best example of the longstanding flaw in Medicare’s cost-control efforts is the Sustainable Growth Rate formula. Adopted in 1997, the SGR aims to prevent the program’s costs from growing faster than the economy by requiring annual reductions in physician reimbursement rates.
The formula was supposed to go into effect in 2003. But Congress has voted each and every year to delay these scheduled cuts.
Legislators know that the current system is unsustainable and threatens patients’ access to care. But they haven’t yet found a workable way to pay for scrapping the SGR. Repealing it would cost an estimated $128 billion.
But the cumulative cost of all the temporary patches since 2003 — which now stands at $154 billion — has already exceeded the cost of that permanent fix.
Repealing the SGR would ensure Medicare’s solvency in a patient-centric, fiscally responsible way. Indeed, focusing solely on the cost of SGR repeal ignores an issue that’s more important — the quality and value of care.
Consider a patient requiring treatment for a herniated disc, a common injury among seniors. A strict price-based analysis might make less expensive, non-operative therapies seem like a better choice than more costly surgical procedures. After all, both treatment strategies have been shown to provide health benefits.
But this simple-minded reasoning fails to consider the wider costs and benefits of each procedure. As a 2008 Dartmouth Medical School study found, “[a]lthough surgery was more costly than non-operative treatment, health outcomes over 2 years were better among those treated surgically.”
Researchers also quantified the overall benefits of surgery relative to its price. They concluded that, for the Medicare population, disc surgery offers value comparable to that of many commonly accepted treatments, such as medications for hypertension.
Compared to those who forgo treatment entirely, disc surgery patients miss three fewer days of work each year. Such increased productivity benefits the larger economy and contributes to a $1,925 increase in patients’ annual earnings.
Rotator cuff surgery delivers similar long-term benefits, thanks largely to reductions in indirect costs like missed work. A 2013 Journal of Bone and Joint Surgery study estimated that society-wide savings from such procedures amount to more than $3.4 billion a year in the United States.
It’s precisely these broad effects of seemingly expensive treatments that shortsighted spending reductions fail to consider.
Unfortunately, as Medicare spending has continued to grow, lawmakers have been unable to put forth a permanent solution. But meaningful reform is finally within reach.
Congress is advancing bipartisan, bicameral legislation that would repeal the SGR. Known as the SGR Repeal and Medicare Provider Payment Modernization Act, the bill replaces the SGR with a payment system that measures and rewards high-quality care. The medical community supports this fix.
As the debate over health spending heats up, Congress must learn from its mistakes and abandon the price-obsessed approach that has dominated our health system for too long. Repealing and replacing the SGR is an important step towards that goal.
Frederick M. Azar, MD, is president of the American Academy of Orthopaedic Surgeons.© Copyright 2014 Tanna K, All rights Reserved. Written For: Tinytown Unleashed