Medicare, Budgets, State Schedules & SGR

When the 12-member Joint Committee on Deficit Reduction (aka "super committee") declared an impasse last Monday and informed the Congressional Budget Office (CBO) its members could not reach an agreement on a plan to trim the deficit by cutting spending or raising revenues, automatic budget cuts to defense and domestic spending were triggered, which includes some reductions to Medicare payments by 2013.

This could lead to a 27.5% reduction in Medicare provider fees on January 1 which would have a major impact on the state's workers' compensation fee schedules.

The American Medical Association (AMA) and other doctors' groups had called on the super committee to find another $300 billion from budget cuts to implement a permanent "Doc Fix" to avoid payment reductions required by the Balanced Budget Act of 1997. The law requires the Centers for Medicare and Medicaid Services (CMS) to adjust physicians' payments each year using the Sustainable Growth Rate (SGR) – a measure of annual provider payments compared to payment targets set for the previous year.

But every year since 2002 -- the year CMS cut medical provider fees by 4.8% -- Congress has stepped in with emergency money to postpone proposed CMS reductions until the following year.

According to experts interviewed by WorkCompCentral, it is more likely than not that such stop gap funding will occur.

26 states tie their workers' compensation medical fee schedules to the Medicare reimbursement rate to some degree making them vulnerable to changes and vagaries affecting the federal system, including its budgetary issues.

One federal legislator has since submitted a bill to get rid of the SGR law until Congress can figure out how to better manage Medicare.

U.S. Rep. Allyson Schwartz, D-Pa., plans to file the Medicare Physicians Payment Innovation Act in the next few weeks after getting a budget-impact estimate from the Congressional Budget Office.

According to Schwartz's staff, her bill would:

• Permanently repeal the SGR and avoid an immediate reduction from the Balanced Budget Act with an appropriation that has not yet been quantified.
• Freeze doctors' payments at 2011 levels, effective Jan. 1, 2012. Physicians' payments would be adjusted gradually over a five-year period while Congress comes up with a new payment system.
• Implement temporary payment differentials between 2013 and 2016. That piece of the legislation would provide an increase of 2.5% for primary care services and a 0.5% increase for all other physician services each year during the period.
• Use the Center for Medicare and Medicaid Innovation (CMMI), established under the Patient Protection and Affordable Care Act of 2010, to test new payment models through a series of ongoing demonstration projects.
• Require the Government Accountability Office to analyze the CMMI models and report back to Congress by April 1, 2015.
• Require CMS to provide Congress with a "menu" of at least four new health-care delivery and payment models by Oct. 1, 2015.
• Freeze medical provider payments again -- at 2016 levels -- while Congress evaluates the new models and adopts one or more for use by Jan. 1, 2017.
• Require the Secretary of U.S. Department of Health and Human Services to update fee-for-service payments under the models adopted by Congress using the Medicare Economic Index beginning in 2022.

The impact on workers' compensation systems should Schwartz' bill be passed is unknown, but clearly would result in an unintended expenses should adoption of new reimbursement models occur because of the complexity of fee schedules. But the good news is that the Schwartz bill changes would occur over a course of several years, giving the states time to adjust their schedules (or disassociate them from Medicare) after analyzing the impact of the changes.

Regardless, as New Jersey workers' compensation lawyer and treatise author, Jon Gelman, told WorkCompCentral, "Right now, the state workers' compensation systems are 50 churches, and they all have their own choirs. They're aware of the problem, but you can't get the workers' compensation people to agree on a unified system."workers compensation, work comp, injured worker