Published 8/1/2008
David A. Lovett, JD

Will the Medicare formula ever be fixed?

When short-term victories are not “wins” for physicians

In 2002, the first negative impact was felt from the flawed sustainable growth rate (SGR)–based Medicare physician payment formula. Since then, the primary goal for all physician associations has been to correct the flawed Medicare physician fee schedule. Like the monster in a “B” horror movie, the flawed payment formula issue emerges from the swamp. Organized medicine has a short-term victory and the monster retreats, only to climb out of the muck—bigger and stronger—in the following year’s sequel. The problem is exacerbated by the fact that, in some instances, short-term fixes have borrowed against the future.

The recent consideration by the U.S. House and Senate of HR 6331, the “Medicare Improvements for Patients and Providers Act of 2008,” was another chapter in this continuing saga. Was the passage of this legislation really a victory—temporarily averting an immediate 10.6 percent physician payment cut but including a guaranteed 21 percent reduction in physician fees in 2010?

Contrary to what some medical organizations may tout, under these circumstances, this legislation is not a solution, and more importantly, not a “victory” for medicine. When will there be a permanent payment fix? After 8 years of failing to find a permanent solution to the flawed Medicare physician payment formula, perhaps organized medicine, particularly the umbrella organizations, should reexamine their strategies.

Initial problems realized
In some respects, the problems with the SGR-based formula were anticipated when the law changing the physician payment formula was passed in 1997. (See the Medicare Payment Formula primer
here) The first detrimental effects were not experienced, however, until the Medicare physician fee schedule of 2002 when physicians received a 5.4 percent reduction to the conversion factor. Since then, the flaws in the SGR-based formula have been so pronounced that Congress has been forced to pass temporary measures—including a retroactive fix—to keep the system from completely falling apart.

The dysfunctional role of medical societies
As the strength and presence of individual medical societies increase on Capitol Hill, the “umbrella” organizations continue to lose membership, clout, and legislative influence. Because specialty groups may use legislative bills or provisions to gain clout in the Congress and among their membership, they see legislation as an opportunity to add their provisions in their own self-interest, even though those provisions may be detrimental to other medical groups.

All members of Congress recognize the need to fix the physician payment formula. Legislation seeking to correct the flawed formula, however, whether short-term or long-term, ultimately becomes a “grab bag” of provisions promoted by various medical groups. HR 6331, for example, contains provisions related to imaging, accreditation of facilities, and appropriateness criteria that are strongly supported by the American College of Radiology, but are not in the best interest of the orthopaedic community. Medical societies, including primary care physicians, anesthesiologists, cardiologists, and others, all advocate for specialty-specific provisions. Table 1 contains a summary of the major provisions of HR 6331, along with the pros, cons, and AAOS position on these provisions.

Because HR 6331 borrows against the future and includes provisions that are detrimental to the orthopaedic community, the American Association of Orthopaedic Surgeons did not publicly endorse the bill.

Because it has beneficial provisions, however, neither did we stand in its way. The AAOS message is quite simple: Stop the partisan politics and enact a permanent solution to the current, flawed physician payment formula.

Although some medical societies—such as the American Association of Neurological Surgeons and the American Society of Cataract and Refractive Surgery—also share our view, many others, including the medical umbrella organizations, continue to settle for short-term fixes and tout them as victories. This makes advocating for a permanent solution difficult. A true victory will only be achieved when a permanent solution to the physician payment formula is signed into law.

The AAOS position
In strategy sessions with congressional representatives, their staffs, and like-minded medical societies, the AAOS office of government relations consistently and clearly makes the following points:

  • Negotiate for a permanent payment fix. Solve the problem, don’t exacerbate it. The Alliance of Specialty Medicine (www.specialtydocs.org), comprising 12 medical societies including the AAOS, has always warned against short-term fixes.
  • Do not engage in partisan politics. Fixing the SGR is a nonpartisan issue that demands a bipartisan solution. Closed-door compromises and secret deals, such as the 2006 agreement that traded acceptance of quality standards for a short-term fix, only serve to further harm the medical profession.
  • Do not attack friends of medicine. The AAOS does not target, attack, or withdraw support from members of Congress who generally support legislation and reforms that benefit the medical community but who oppose specific legislation such as HR 6331. Although other medical societies and state associations might choose to withdraw their endorsements of support for House and Senate members who opposed HR 6331, despite their previous record of support and friendship to the medical community, the AAOS refrains from engaging in such partisan politics. These individuals understand the problems inherent in such legislation and are willing to continue to work toward a permanent fix. The AAOS and other specialty societies recognize the importance of preserving relationships with our friends in Congress and will not “jump ship” over legislation that is not cohesive with our longstanding views.
  • Examine the totality of the bill before actively supporting legislation. AAOS fellows need to understand both the positive and negative impacts a particular piece of legislation might have on the orthopaedic community. General communications from other medical societies and their umbrella organizations on HR 6331, and similar legislation in years past, failed to include the full story on all provisions included in the bill. The AAOS office of government relations will make every effort to inform the fellowship of the full story, through articles in AAOS Now and AAOS Advocacy Now, as well as other outreach efforts.

Change the legislative strategy
Perhaps medical umbrella organizations should reexamine their strategies and work together to implement a permanent solution that all of medicine finds acceptable. Clearly, past strategies have not worked, and it is time for a change. Averting a 10.6 percent cut with the guaranteed promise of a 21 percent cut in 2010 is not a solution.

The AAOS office of government relations will continue to provide updates on all attempts to fix the flawed physician payment formula, whether short-term or long-term. It will also continue to work with House and Senate leadership and other medical societies to seek a permanent solution.

The AAOS Board of Directors leadership and David A. Halsey, MD, chair of the Council on Advocacy, welcome and value the views of Academy fellows on future courses of action. Contact dc@aaos.org with your suggestions.

David A. Lovett, JD, is director of the AAOS office of government relations. He can be reached at lovett@aaos.org

Want to know more?
The Medicare physician payment formula was a primary focus of the 2008 National Orthopaedic Leadership Conference. For slide presentations on the sustained growth rate formula, fact sheets, and a wealth of additional background material, visit the AAOS office of government relations
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