Is the sustainable growth rate, er, sustainable?

The short answer is "no."  The SGR (a Medicare "guardrail," if you will, for physician reimbursement increases) has been zapped by Congress every year of its existence because letting it actually go into effect is unpalatable — it would cut physician reimbursement by about 40-50%.  (See earlier HealthBlawg posts on the subject here and here.)  The most recent legislative fix yielded a modest increase (one that doesn’t keep pace with inflation) tied to new reporting requirements and attendant costs.

Gail Wilensky, former HCFA administrator, testified at a recent congressional committee hearing on this quagmire of a policy, and revisited those remarks at the Health Affairs Blog.  She homes in on the point that either the SGR needs to be applicable to all provider types or it needs to be replaced with a new approach.  She also highlights various other approaches to cost-effective reimbursement for health care services that are being rolled out in various CMS demonstration projects — e.g., P4P, gainsharing — as potential sources of solutions for the payment problems being faced by Medicare. 

The issues for these potential solutions are two-fold (at least . . . ) .  First, these demonstrations are just that –demonstrations, not yet ready for prime time.  It will take time — time that we don’t have — to refine these approaches sufficiently to make them generally applicable. 

Second, preliminary indications are that each of these demonstrations may offer a short-term uptick in reimbursement for successful participants, but may not offer a long-term solution to spiraling health care costs.  For example, moving from fifth decile to first decile in the Premier demonstration is a good thing for an individual hospital, but what happens when all participating hospitals are at or near this year’s first decile performance levels?  (Read more on this subject in an earlier HealthBlawg post here.)  Gainsharing also holds out a promise of short-term financial gains for individual program participants; for the broader provider community, it holds out the promise of more measures to track, and the promise of aiding CMS in pinpointing inaccuracies of its reimbursement formulas so as to allow for further ratcheting down of payments in those areas in which providers have any gains to share.

I recognize that what I’m offering here is more critique than constructive criticism, but the trenchant problem of runaway health care costs can’t be solved this morning "while standing on one foot."  My concern is that many of the solutions being offered are band-aids that respect the interests of the regulated community (though certain members of that community will be sure to differ).

Are we willing, collectively, to see a P4P system that penalizes poor performers or eliminates payment for certain procedures or pharmaceuticals?  How far are we willing to go to bring the many interests in the medical-industrial complex in line with current fiscal realities?

Update 3/21/07:  Special bonus for insomniacs: link to MedPAC’s 236-page report Assessing Alternatives to the SGR System.

— David Harlow