House Passes Medicare SGR Fix

November 19, 2009

November 19, 2009 — The US House of Representatives today passed a Democratic-sponsored bill 243 to 183 that would rewrite the controversial sustainable growth rate formula in Medicare and eliminate a 21.2% Medicare pay cut for physicians scheduled for 2010.

It's a vote that is likely to retain organized medicine as a supporter of Democratic healthcare reform legislation.

Leaders of the American Medical Association and other major societies have maintained that a permanent revision to the SGR formula was an essential part of healthcare reform and that without such a revision they may not continue to back other reform initiatives.

In a concerted lobbying effort, 127 national and state medical societies sent a letter to House Speaker Nancy Pelosi (D-Calif) last week urging passage of the bill passed today, H.R. 3961.

"Medicine can no longer support the sort of short-term patches that have been used in the past," the letter stated. The only 2 state medical societies that were not signatories were the Medical Society of New Jersey and the Alaska State Medical Association.

H.R. 3961 would add $210 billion to the federal deficit, according to the Congressional Budget Office. That red ink had galvanized Republican opposition to the bill. House Republicans failed to introduce a substitute SGR bill that would have given physicians a 2% raise from 2010 through 2013. They claimed that their legislation would not add to the federal deficit because it contained cost-saving reforms, most notably in the area of medical liability, that would offset its price tag.

Several House Republicans said today that the Democrats are irresponsibly increasing the deficit as part of a quid pro quo with organized medicine, which has backed Democratic healthcare reform efforts by and large. "This is little more than a political payoff to the American Medical Association (AMA)," said Rep. Joe Barton (R-Texas).

The AMA, the American Academy of Family Physicians, the American College of Physicians, and other groups had lent their support to a Democrat-sponsored House healthcare reform bill, passed November 7, that would cover 96% of legal nonelderly residents by 2019. An earlier version of this House legislation included a fix to the SGR formula. But thanks largely to the SGR provision, the cost of the legislation would have topped $1 trillion and added $239 billion to the deficit. To make reform more palatable to fiscal conservatives, House Democrats carved out the SRG fix and put it the separate bill passed today.

New SGR Formula Has a Little Extra for Primary-Care Physicians

A cost-control measure, the SGR sets a target each year for Medicare expenditure on physician services based on growth in the gross domestic product (GDP). If expenditures exceed the target, Medicare attempts to recoup the money by cutting physician reimbursement. The SGR has triggered such cuts every year since 2002, but Congress has called them off in response to physicians who claim they will stop seeing Medicare patients if their reimbursement decreases. However, the difference between targeted and actual spending on physician services accumulates, which means that the pay cuts become postponed — and larger — year by year.

Organized medicine has argued that GDP growth is a flawed benchmark for the SGR because the cost of running a medical practice typically grows at a higher rate.

H.R. 3961 would wipe out the accumulated SGR debt and create a more generous formula for setting physician pay. In 2010, the bill would give physicians a 1.2% raise based on the Medicare Economic Index, which measures inflation in physician-practice costs. In 2011 and beyond, the formula would revert to growth in GDP, plus a little extra. The bill calls for a separate target for spending on evaluation and management services and preventive care based on GDP plus 2% — a boon to primary-care physicians. There would be another target for spending on all other physician services based on GDP plus 1%.

Now that the House has passed H.R. 3961, physicians look next to the Senate to take up the matter of Medicare reimbursement — again. Last month, the Senate squashed a $247 billion SGR bill in a 47-53 procedural vote, with Senate Republicans and conservative Democrats condemning it as an exercise in deficit spending. Unlike its House counterpart, the Senate bill would have frozen physician payment rates at their current levels. Senate Democrats maintained that separate healthcare reform legislation would have built on the SGR bill to make Medicare reimbursement more attractive to physicians.

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