Cost of Doc-Fix Bill 26% Higher Than Previous Estimate

September 13, 2013

The much-heralded bill in the House that would repeal Medicare's sustainable growth rate (SGR) formula for setting physician reimbursement faces another potential obstacle for passage — a bigger price tag than previously cited.

Paying for a more expensive "doc fix," as such bills are called on Capitol Hill, heightens the angst of a 24.7% Medicare pay cut that the SGR formula will trigger next year unless Congress acts to avert it.

Today, the Congressional Budget Office (CBO) announced that the latest doc-fix proposal, called the Medicare Patient Access and Quality Improvement Act, will cost $175.5 billion over 10 years. That is 26% higher than an earlier CBO cost estimate of $139 billion for repealing the SGR formula that lawmakers and leaders of organized medicine frequently mentioned as the bill in question cleared the House Energy and Commerce Committee this summer.

"I think we need $139 billion over 10 years," said Rep. Joe Barton (R-TX), chairman emeritus of the House Energy and Commerce Committee, at a health subcommittee meeting on July 22.

The $139 billion estimate assumed freezing physician reimbursement rates at their current level for 10 years. In contrast, the Medicare Patient Access and Quality Improvement Act gives physicians a guaranteed annual raise of 0.5% from 2014 through 2018, and the double-sided opportunity afterward to receive either more than a 0.5% raise or take a pay cut, depending on the quality of their care.

Aside from future pay raises, repealing the SGR formula — and along with it, the 24.7% rate reduction scheduled for 2014 — requires retiring the equivalent of $139 billion in debt. This red ink accumulated as a result of Congress having postponed SGR-mandated pay cuts in Medicare every year from 2003 through 2013.

While $139 billion is an enormous amount of money, it is far less than the $245 billion that the CBO calculated in August 2012 as the cost of repealing the SGR formula and freezing Medicare rates for a decade. The agency lowered its estimate in light of reduced Medicare spending on physician services. The shrunken price tag for a doc fix has inspired hope that a Congressional solution is more attainable, especially in a climate of extreme fiscal constraint.

The latest estimate of $175.5 billion is still "a fire-sale deal," said Jeffrey Cain, MD, president of the American Academy of Family Physicians, in an interview with Medscape Medical News. "It's a discount of estimates we've see in the past."

The increase from $139 billion to $175.5 billion isn't a surprise, added Dr. Cain, because the smaller estimate did not involve a pay raise. "The bill writers were hoping to keep it under $200 billion," he said.

The Medicare Patient Access and Quality Improvement Act has garnered bipartisan support in the Republican-controlled House, but that support could break down as lawmakers take the next step — finding either new sources of revenue or spending cuts to pay for the bill and thus keep it budget-neutral. Agreeing on "pay-for's" to offset the cost of legislation is challenging, especially when one party wants to siphon dollars from its opponents' favored programs. Case in point: House Democrats fear that Republicans may attempt to shift the cost of the SGR repeal bill onto Medicare beneficiaries by requiring them to pay more out of pocket for their care.


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