House GOP Advances 'Doc Fix' for SGR Crisis

May 29, 2013

Republican leaders of the House continue to inch toward a replacement of Medicare's notorious sustainable growth rate (SGR) formula for setting physician reimbursement, releasing draft legislation yesterday that gives organized medicine a big role in determining how its members are paid.

By repealing the SGR formula, the draft legislation would avert a 24.4% Medicare pay cut that is scheduled for January 1, 2014. Medicare reimbursement would slowly shift to a mix of fee-for-service (FFS) and pay-for-performance, with medical societies designing the yardsticks for measuring performance. In addition, physicians could choose from a menu of payment options.

The draft legislation, issued by GOP leaders of the House Energy and Commerce Committee, closely hews to an SGR "doc fix" that these Republicans and their counterparts on the House Ways and Means Committee first unveiled in February. The latest version comes after extensive consultation with organized medicine, which has long lobbied for repealing the SGR formula. The health subcommittee of the Energy and Commerce Committee has scheduled a hearing on the draft legislation for June 5.

The House GOP "doc fix" taking shape for the Medicare reimbursement crisis competes with SGR repeal legislation introduced in February by Rep. Allyson Schwartz (D-PA) and Rep. Joe Heck, DO (R-NV). Their bill also takes a gradual turn toward pay-for-performance, but unlike the bill from the House GOP leadership, it eventually phases out FFS reimbursement as opposed to preserving it in a modified form.

In addition, budget proposals from Senate Democrats and President Barack Obama assume the demise of the SGR formula, enacted by Congress in 1997 to control Medicare spending on physician services. Although Republicans and Democrats alike have talked about repealing the formula for years, lawmakers say 2013 could be the year when talk turns to action, given a fiscal opportunity that has fallen into their lap.

Every year since 2002, the formula has called for a cut in physician reimbursement, but with the exception of 2002, Congress has postponed each cut. "Kicking the can down the road," as Capitol Hill likes to call it, has caused the cuts to accumulate to their current level. In an age of deficit-anxiety, lawmakers have been loath to repeal the SGR formula and its massive pay cut outright on account of the price tag. In January 2012, the Congressional Budget Office (CBO) put the cost of repeal — together with a 10-year freeze of Medicare rates — at $316 billion. However, given a recent slowdown in Medicare spending on physician services, the CBO revised the cost downward to $139 billion a few months ago. Now a doc fix looks much more affordable.

Bonuses for Quality and Efficiency

Under the plan laid out yesterday by Republican leaders of the House Energy and Commerce Committee, 2014 would usher in several years of Medicare payment stability, created by predictable, statutorily defined FFS rates. In the next phase, Medicare would adjust FFS rates upward or downward based on quality measures and "clinical improvement activities," such as reporting clinical data to a registry that medical societies would develop and endorse.

Medicare also would take into account how physicians rank within their specialty on a risk-adjusted basis, as well as how their scores change over time, according to an overview of the plan released by House Republicans.

Physicians would be given timely access to their performance scores. That provision jumps off the page in light of long lag times in the past between performance and report cards in Medicare's Physician Quality Reporting System, a source of consternation to organized medicine. In other nods to medical societies, House Republicans say their plan will "reduce the reporting burden on physician practices" and "override the current ineffective CMS quality measurement programs."

Republicans add that they will "align Medicare payment initiatives with private payer initiatives." At the same time, physicians participating in accountable care organizations, medical homes, and other Medicare experiments in alternative reimbursement can stay where they are.

In the third phase of the new Medicare payment system, physicians who earn bonuses for their quality of care will have a chance to earn additional bonuses for being efficient. Again, all this comes on top of FFS reimbursement. Physicians retain their right to receive their Medicare dollars under alternative arrangements.

The draft legislation requires the Department of Health and Human Services to regularly assess both the modified FFS system and alternative Medicare and private payer reimbursement methods with an eye to continual improvement. The goal is to provide "reimbursement options — instead of the current one-size-fits-all approach — that enables physicians to select the Medicare payment system that best fits their practice."

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