Senate Democrats' Budget Assumes SGR Repeal

March 14, 2013

Senate Democrats released a budget proposal for fiscal 2014 yesterday that, unlike its House Republican counterpart, assumes the repeal of Medicare's sustainable growth rate (SGR) formula and the 26.5% physician pay cut that it would trigger.

The plan from Sen. Patty Murray (D-WA), chair of the Senate budget committee, factors in the $138 billion cost of maintaining Medicare rates at their current level for 10 years.

Another assumption in Murray's budget is the rollback of an additional 2% reduction to Medicare rates scheduled for April 1 that resulted from automatic, across-the-board cuts to military and domestic spending called sequestration. The budget allocates almost $1 trillion to replace the sequester cuts.

In contrast, the budget released Monday by Rep. Paul Ryan (R-WI), chair of the House budget committee, assumes that both the SGR and sequestration cuts to Medicare reimbursement will occur.

The GOP budget signals at least an intent to repeal the SGR formula. It creates a "deficit-neutral reserve fund" that would allow Ryan later on to find money elsewhere in the budget to pay for a repeal, provided that the deficit does not grow as a result.

The Murray budget also features a deficit-neutral reserve fund for replacing the SGR with another payment arrangement. However, her plan also stipulates new healthcare savings of $275 billion over 10 years that could offset the cost of both SGR and sequestration repeal, said Paul Van de Water, a senior fellow at the nonpartisan Center on Budget and Policy Priorities in Washington, DC.

Van de Water told Medscape Medical News that the Murray budget does not explicitly present the $275 billion in healthcare savings as an offset, "but that's the clear way it should be read."

The budget lends itself to this interpretation. It contains language explaining that the budget will replace sequestration with new revenue and cuts to domestic and defense spending.

Van de Water notes that any budget proposal enacted by Congress is only a blueprint for federal spending. Neither the Ryan nor Murray plans — budget resolutions, in Capitol Hill parlance — would actually repeal the SGR formula, for example. Congress would have to pass additional legislation to do that.

The use of deficit-neutral reserve funds in budget resolutions helps lawmakers overcome possible procedural obstacles in their efforts to pass a particular bill. However, some experts say that reserve funds often amount to gimmicks that lawmakers drop into budget resolutions to give the impression that they are addressing an issue absent any true fiscal commitment.

Jeffrey Cain, MD, president of the American Academy of Family Physicians (AAFP), said he is encouraged by the presence of the deficit-neutral reserve funds for SGR repeal in the Democratic and Republican budgets. However, Dr. Cain told Medscape Medical News that success hinges on lawmakers coming up with the "pay-for." Otherwise, organized medicine remains in an SGR "limbo."

"The budget proposals don't guarantee a solution," said Cain, noting that the AAFP is still studying the 2 plans.

Fuel for the Partisan Bonfire

The assumptions about Medicare reimbursement for physicians are just a few of the dramatic differences between the Democratic and Republican budget proposals, which add more fuel to the already fierce partisan bonfire in Washington, DC.

The Democratic plan for fiscal 2014, which begins October 1, would shrink the federal deficit by $1.85 trillion over 10 years with an equal mix of spending cuts and new revenue raised by closing tax loopholes and making other tax-code changes to eliminate "wasteful spending…for the wealthiest Americans and corporations."

The more ambitious Republican plan slashes the deficit by $4.6 trillion over 10 years while reducing both corporate taxes and the top rate for individuals to 25%. It posts a balanced budget by 2023, which the Democratic budget does not.

Ryan stresses the importance of avoiding a crippling debt crisis, while Murray warns that "deficit reduction at the expense of economic growth is doomed to failure." Her budget earmarks $100 billion for a jobs and infrastructure program to put more Americans to work.

The ideological differences filter down to government healthcare programs and healthcare in general. The House GOP proposal calls for limiting federal contributions to state Medicaid programs by turning them into block grants and giving seniors what amount to vouchers to purchase either a private Medicare plan or traditional Medicare coverage. Republicans say these and other changes to Medicaid and Medicare will strengthen the 2 programs. Democrats counter that the GOP proposals will have the opposite effect.

And while the Republican budget envisions the repeal of the Affordable Care Act (ACA), the Democrats' budget seeks to build on the controversial law. That's where some of the $275 billion in projected healthcare savings comes into the picture. Democrats say that new models of delivering high-quality, low-cost care, now being tested under the auspices of the ACA, could reduce the waste that accounts for almost one-third of healthcare spending.

"It is critical that we work to translate what we learn from these models into broader system-wide reforms," states the Democrats' budget.

Likewise, the federal government should aggressively promote other reforms, possibly bundled payments and pay-for-performance. Even more savings can be realized by continuing to crack down on Medicare and Medicaid fraud.

The GOP budget resolution this week has come under intense fire from Congressional Democrats, who contend that it favors America's wealthy at the expense of the middle class. In turn, Republicans have lambasted the Democratic numbers.

"I'm happy to see the Senate Democrats have written a budget," said the GOP's Paul Ryan in a statement issued today. "The only problem is, it doesn't balance — ever. It simply takes more from hardworking families to spend more in Washington."