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Update on the Centers for Medicare and Medicaid Services

By Jessica DeMartino, PhD, NCCN Policy Fellow

On April 19, 2010, President Obama officially nominated pediatrician Dr. Donald Berwick as his appointment for administrator of the Centers for Medicare and Medicaid Services (CMS).  Dr. Berwick is a clinical professor of pediatrics and health care policy at Harvard Medical School and professor of health policy and management at the university’s School of Public Health.  Dr. Berwick currently serves as President and CEO of the Institute for Healthcare Improvement.  CMS has not had a permanent administrator since October 2006 when Dr. Mark McClellan stepped down.

Dr. Berwick will first face a hearing by the Senate Finance Committee prior to appearing before the full Senate for confirmation.  The Senate confirmation hearing may be used by Republicans to debate the merits of the new health care law and to further explore how the administration plans to carry it out.

Once confirmed, Dr. Berwick will be working with a CMS principal deputy administrator with extensive hands-on experience and knowledge in running both public and private health systems, an area where Dr. Berwick lacks experience.  In mid-February, Marilyn Tavenner was named principal deputy administrator.  Ms. Tavenner has previously led Virginia’s health department and held senior positions at the Hospital Corporation of America.  She has also added the role of chief operating officer and will serve as acting agency administrator until Dr. Berwick is confirmed by the Senate.

Besides managing the enormous size and complexity of CMS, Dr. Berwick will also have the unenviable task of implementing many provisions of the health care system reform package signed into law by the President in late March.  For example, in the short term Dr. Berwick, if confirmed, will be responsible for establishing a Center for Medicare and Medicaid Innovation within CMS.  The Center, which must be up and running by January 1, 2011, will develop and implement new payment approaches that improve the quality of care and reduce costs.

Update on Medicare SGR Cuts
On April 15, 2010, President Obama signed into law a measure to extend the effective date of a 21.2 percent Medicare sustainable growth rate (SGR) pay cut from April 1 to June 1.  This six-week extension gives Congress a temporary reprieve to develop a more permanent solution.

The SGR formula was introduced in 1997 as part of the Balanced Budget Act to help control Medicare spending.  The formula establishes an annual target for expenditures on physician services based on growth of the gross domestic product.  If actual expenditures overshoot the target for a given year, Medicare is supposed to lower physician reimbursement the next year to recover the difference.  Many medical societies consider the formula flawed in part because the cost of operating a medical practice typically grows faster than the gross domestic product.

Every year since 2003, physicians have been scheduled to receive rate decreases under the SGR, but each time Congress has passed “patches” (except 2007) that have delayed the rate decreases and instead have provided small increases.  This has led to the cuts accumulating year to year and projected deeper SGR cuts each subsequent year.  This accounts for the scheduled 21.2 percent cut.

While physicians are thankful for the extension, many medical societies are calling for more drastic action.  They have urged Congress to replace the SGR formula with a formula they consider more equitable.  Organized medicine has also warned that if the massive pay cut becomes reality, physicians will stop seeing Medicare beneficiaries and military families covered by TRICARE, which bases its fee schedule on Medicare rates.

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