APAPO comments on congressional proposal to reform Medicare payment system

The current proposal to replace the Sustainable Growth Rate formula includes a 10-year payment freeze and revised payment mechanisms.

On Nov. 12, the American Psychological Association Practice Organization (APAPO) provided feedback on a draft proposal by the Senate Committee on Finance and the U.S. House of Representatives Committee on Ways and Means to repeal Medicare’s Sustainable Growth Rate (SGR) formula and reform the Medicare payment system. If the SGR formula is not changed or blocked, all Medicare providers face a drastic 24.4 percent cut scheduled to occur on Jan. 1, 2014. 

Established as part of the Budget Control Act of 1997, the SGR formula is the current method used by the Centers for Medicare and Medicaid Services (CMS) to curtail Medicare provider costs. The SGR formula was intended to hold the Medicare program to a targeted level of spending based on rates of growth in physician service costs, Medicare enrollment levels and real gross domestic product per person. 

As the volume of physicians’ service costs have increased, the SGR formula has required more severe cuts to provider payment rates each year. In part due to the advocacy efforts of APAPO, Congress has acted 15 times since 1998 to block those cuts, most recently through the American Taxpayer Relief Act on Jan. 2, 2013, which blocked the cut through the end of 2013. 

Because Medicare is subject to budget neutrality, services with relatively low overhead and practice expense costs — including psychologists’ services — are being unfairly reduced to offset increases in services with higher practice expense costs. Payments to clinical psychologists under Medicare have declined nearly 22 percent in the last six years. The reimbursement rate for the most common mental health service (a 45-minute psychotherapy service) declined 37 percent between 2000 and 2012, when adjusted for inflation.

The proposal put forth by the Finance and Ways and Means committees, if enacted, would continue a pattern of Medicare provider payment decisions that devalue psychological services relative to general medical services, threatening beneficiary access to mental health treatment. APAPO submitted a letter (PDF, 128KB) detailing concerns and offering suggestions to improve the current SGR formula proposal.  

The draft proposal would freeze all Medicare provider payments under the SGR for the next 10  years. On top of this, the proposal adds payment mechanisms to incentivize cost-effective, high quality care. One of these — a new Value-Based Performance (VBP) payment program — would adjust Medicare payments based on a provider’s performance in four areas: quality of care measures; resource use metrics; clinical practice improvement activities and meaningful use of electronic health records (EHR). Bonus payments for providers who score well on the VBP criteria would be paid for by payment reductions for providers who score poorly.

APAPO pointed out that as described, the proposal would leave psychologists ineligible for at least two, and likely three, of the four scoring components. The “quality measures” assessment category, based on the current Medicare Physician Quality Reporting System (PQRS), is the only one for which psychologists would be guaranteed to be eligible. APAPO is still working to gain the inclusion of psychologists under Medicare’s “physician” definition and to gain eligibility for incentive payments under the Behavioral Health Information Technology Act; if Congress enacts such legislation, psychologists would be eligible for this component of the VBP bonus payment scoring. 

Without changes, however, the formula’s structure guarantees that psychologists will have lower scores than general medical service providers, and thus will face lower reimbursement rates. This replicates the same issue created by the current Medicare payment formula — payment increases for higher-cost, technology-driven services at the expense of those who provide low-overhead services. This issue is driving psychologists away from Medicare and reducing access to psychological services. 

Additional components of the SGR formula proposal 

Complex chronic care coordination 

The committees’ proposal encourages care coordination for individuals with complex chronic care needs, but appears to exclude psychologists and other behavioral health providers from eligibility for chronic care coordination payments. APAPO urged the committees to recognize that integrating mental and behavioral health services into primary care settings and the patient-centered medical home is critical to improving health outcomes, and to specifically include psychological services within the definition of chronic care coordination. 

Alternative Payment Models (APMs)

The committees' proposal would provide 5 percent bonus payments for certain providers participating in alternative payment models (APMs), which place the provider at financial risk. APAPO supports the development of APMs for the delivery of mental and behavioral health services, though they are not yet as well-developed as APMs for general medical services. Given the important issues raised by alternative payment models, APAPO expressed interest in working with the committees to ensure that such models support appropriate service delivery for patients with chronic conditions, and for whom maintaining functioning constitutes successful treatment.

Changes to SGR and the Physician Fee Schedule

APAPO expressed concern about the committees' proposed 10-year payment freeze, as well as the proposal's call for a 10 percent payment reduction for professionals who do not comply with information requests from the Secretary of Health and Human Services for evaluating Medicare reimbursement rates. The proposal does not specify what information the secretary could request, which could result in inappropriately complex, detailed and time-consuming requests, thereby significantly burdening providers.

APAPO will continue to work with members of Congress and grassroots advocates on the SGR and other Medicare payment issues. For more information, contact the Government Relations office by email or by phone at (202) 336-5889.