SGR Repeal Bill Favors Primary Care

February 06, 2013

Two members of Congress today reintroduced an ambitious bill that would repeal Medicare's sustainable growth rate (SGR) formula for setting physician pay and gradually phase out fee-for-service (FFS) reimbursement.

One major difference this time around for the bipartisan bill, originally introduced in May 2012, is that its price tag appears considerably lower, making passage more likely.

When Reps. Allyson Schwartz (D-PA) and Joe Heck, DO (R-NV), proposed this legislation last year, the Congressional Budget Office (CBO) had estimated that repealing the SGR and merely freezing current Medicare rates for 10 years would cost roughly $320 billion.

Since then, the CBO has reduced that 10-year estimate on the basis of lower than projected Medicare spending on physician services for the past 3 years. In a budget forecast released yesterday, the agency put the cost of a 10-year rate freeze at $138 billion.

The immediate effect of the bill from Schwartz and Dr. Heck, titled the Medicare Physician Payment Innovation Act, would be to avert a Medicare pay cut of roughly 25% on January 1, 2014, that is mandated by the SGR formula. Instead, the bill maintains 2013 rates through the end of 2014.

After 2014, Medicare would begin to shift from FFS to a methodology that rewards physicians for the quality and efficiency of patient care. From 2015 through 2018, the rates for primary care, preventive, and care coordination services would increase annually by 2.5% for physicians for whom 60% of Medicare allowables fall into these categories. Medicare rates for all other physician services would rise annually by 0.5%.

Meanwhile, the bill calls on the Centers for Medicare & Medicaid Services (CMS) to step up its efforts to test and evaluate new models of delivering and paying for healthcare (experiments with medical homes, accountable care organizations, and bundled payments are already underway). By October 2017, CMS must give physicians its best menu of new models to choose from. Two menu options would allow some physicians unable to fully revolutionize to participate in a modified FFS scheme.

The year to transition from FFS to "high quality, high value care" will be 2019 under the legislation. Physicians will either operate in a new, CMS-approved delivery and payment model of their choosing or traditional FFS Medicare. The government would keep FFS rates in 2019 at 2018 levels.

After 2019, physicians still embracing traditional FFS Medicare would see their rates reduced until 2024, when they would be permanently frozen at 2023 levels. Physicians operating in the new models, in contrast, would have the opportunity to earn raises for high-quality, low-cost care.

Press materials from Schwartz and Dr. Heck do not establish a cost for all these changes, which are different from freezing current Medicare rates for 10 years.

ACP, AAFP, ACC Support Bill

Congress enacted the SGR formula in 1997 to slow the growth of Medicare spending. The formula has called for pay reductions each year going back to 2002, and in each of those years, except 2002, Congress postponed the cut, which had the effect of making next year's reduction even larger. Medical societies have warned that if a massive SGR pay cut ever takes effect, physicians would desert Medicare in droves, leaving seniors in the lurch. The societies have long lobbied Congress to repeal the formula, which they consider flawed because it bases physician pay in part on increases or decreases in the gross domestic product when it should be linked to medical-practice inflation, in their opinion.

The new version of the Physician Payment Innovation Act garnered praise from much of organized medicine.

"We enthusiastically support this legislation," said Charles Cutler, MD, chair-elect of the Board of Regents of the American College of Physicians, in a press release issued by the 2 lawmakers. "Over the past decade, the repeated threat of cuts to physician payments resulting from the SGR has brought chaos to the practice environment. It is difficult for physicians to keep their doors open, especially for our members in small or solo practices, with the constant threat of Medicare payments being cut by 25% or more."

Jeff Cain, MD, president of the American Academy of Family Physicians, said in the same press release that the bill ends "repeated threats to physicians' ability to provide care for Medicare beneficiaries" and "paves the way for innovations such as the patient-centered medical home."

Other medical societies that have officially signed on as supporters include the American College of Obstetricians and Gynecologists, the Society of Hospital Medicine, the American Osteopathic Association, the American College of Cardiology, and the American Academy of Neurology.

One major society that did not appear on the list of supporters was the American Medical Association (AMA). In a separate press release, AMA President Jeremy Lazarus, MD, expressed more cautious sentiments. Dr. Lazarus thanked Schwartz and Dr. Heck for their work to repeal the SGR formula and called their legislation "an important part of the continuing discussion on the future of Medicare and the end of the SGR."

Although the list of medical societies backing the Physician Payment Innovation Act includes some that represent procedure-oriented specialists, it is dominated in terms of sheer membership by societies oriented toward primary care. And not a single society on the list has the word "surgery" in its title. Then again, the absence of these and other specialty societies might not come as a surprise, given how the bill boosts reimbursement for primary care, preventive, and care coordination services by 2.5% for 4 years in a row, while bumping up the rates for all other services by only 0.5%.