New Bipartisan Plan to Repeal SGR Faces Tight Schedule

November 01, 2013

Just when it seemed that the partial government shutdown and debt-ceiling crisis had sucked all the political oxygen out of Capitol Hill, a bipartisan group of lawmakers unveiled yet another proposal to repeal Medicare's notorious sustainable growth rate (SGR) formula for setting physician compensation.

Its authors are the Senate Finance Committee, controlled by Democrats, and the House Ways and Means Committee, where Republicans hold sway.

The proposal, not yet introduced as official legislation, builds on a bipartisan bill out of the House Energy and Commerce Committee that would replace the SGR formula with a new compensation system, one that shifts from fee-for-service to pay-for-performance. Yesterday's proposal takes the same basic approach but goes a step further by consolidating 3 Medicare incentive programs, including meaningful use of electronic health records, into a single program for the sake of administrative simplicity.

Organized medicine has complained to Congress that physicians are confused and frazzled by overlapping, out-of-sync rules for the 3 programs, which also include the Physician Quality Reporting System and the Value-Based Modifier. Each program has its own set of bonuses and penalties.

The new bipartisan plan would freeze Medicare rates for 10 years but give physicians an opportunity to earn bonuses — and risk penalties — under a new value-based performance (VBP) program. Physicians can exempt themselves from the VPB program if they participate in alternative payment models such as medical homes and accountable care organizations, which have financial upsides and downsides themselves.

Another Temporary "Patch?"

Lawmakers do not have much time to deliberate on the latest "doc fix" to the long-standing Medicare reimbursement crisis. The SGR formula, created by Congress in 1997 to curb fee-for-service spending on physician services, will trigger a 24.4% reduction in Medicare rates on January 1 unless Congress acts in time to avert it. Annual SGR-mandated cuts going back to 2003 have simply been postponed.

Truncating this repeal timetable is the October 16 legislation that reopened the government by funding it through January 15 and prevented a government default by lifting the debt ceiling until February 7. The measure also called for a bipartisan budget conference committee composed of House and Senate members to forge an agreement on federal spending and deficit reduction. The committee would like to produce a plan by December 13, when the House is scheduled to recess for the holidays, to avoid another round of last-minute legislating before the government runs out of money on January 15. A spokesperson for Senate Assistant Majority Leader Dick Durbin (D-IL) told Medscape Medical News that the Senate has not yet set a date to recess in December.

The work of the conference committee promises to be a controlling factor for an SGR repeal bill. Lawmakers want to attach it to a larger piece of legislation that reforms Medicare and other entitlement programs in one fell swoop, said Anders Gilberg, senior vice president of government affairs at the Medical Group Management Association.

"The chances of a stand-alone [SGR repeal] bill are a long shot at best," Gilberg told Medscape Medical News, echoing the prediction of other Capitol Hill observers.

Gilberg also thinks it is a stretch for Congressional Republicans and Democrats to craft a budget compromise before December 13, given their track record of acrimonious stalemate. If no legislation emerges from the committee, Congress would likely pass a stand-alone SGR "patch," delaying the 24.4% Medicare pay cut for a few months or perhaps another year, Gilberg said. This move leaves lawmakers with the option of folding a permanent doc fix into a comprehensive budget agreement down the road.

The Challenge of Finding "Pay-For's"

The Medicare reimbursement reforms proposed by the Senate Finance Committee and the House Ways and Means Committee have already received good reviews, if not necessarily endorsements, from organized medicine, which has high hopes for a permanent doc fix this year. Medical societies may experience disappointment, however, as lawmakers next consider how to pay for replacing the SGR formula with a new Medicare reimbursement system.

The Congressional Budget Office (CBO) put the cost of the SGR repeal bill passed by the House Energy and Commerce Committee at $175.5 billion over the course of 10 years. Merely freezing Medicare rates at their current levels for a decade would cost $139 billion, the amount of money that the government expects to save if the massive 24.4% cut takes place. The new doc fix proposal has not been priced so far.

Lawmakers do not want a doc fix to increase the federal deficit, so they must offset the cost either with new sources of revenue — as in taxes — or spending cuts elsewhere in the budget. Those are all fighting words in today's Congress.

"It's not the policy that's controversial, it's the pay-for's," said Gilberg. "That's the most controversial part."

The new SGR-repeal proposal omits this contentious subject of pay-fors, except to say that eliminating penalties under the 3 existing Medicare incentive programs would free up an additional $10 billion for physician payments over the course of 7 years. Potential penalties would crop up, however, in the VBP program. Lawmakers characterize the program as budget-neutral, meaning that bonuses paid to high-performing physicians would be offset by penalties for poor performers.

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