New SGR Repeal Bill Includes Slight Pay Hikes

February 06, 2014

Facing a March 31 deadline to avert catastrophe in medical practices, a bipartisan group of House and Senate members today introduced a bill that would repeal Medicare's sustainable growth rate (SGR) formula for setting physician reimbursement.

The bill would gradually shift Medicare compensation from fee-for-service to pay-for-performance and, in the meantime, raise payment rates 0.5% each year from 2014 through 2018. It also would consolidate 3 Medicare incentive programs, including the one for meaningful use of electronic health record systems, in response to physician complaints that the programs are uncoordinated and confusing.

The SGR formula, criticized by organized medicine and lawmakers alike as a defective cost-control tool, calls for an almost 24% cut in Medicare rates this year. Physicians have threatened to quit Medicare in droves if the draconian cut goes through, a move that would leave many seniors without a healthcare provider. Last year, Congress voted to postpone the reduction from January 1 to April 1. Lawmakers have been delaying SGR-mandated cuts every year since 2003.

"We have a real opportunity to repeal the SGR once and for all to provide seniors, and the doctors who care for them, some much-needed certainty," said Rep. Dave Camp (R-MI), chair of the House Ways and Means Committee, in a news release. "The legislation today provides stability for physicians so they will no longer face the uncertainty of massive cuts, but also begins the process of improving how we pay for medical care to focus on positive results for seniors."

Other sponsors of the bill are Sen. Max Baucus (D-MT), chair of the Senate Finance Committee; Sen. Orrin Hatch (R-UT); Rep. Sander Levin (D-MI); Rep. Fred Upton (R-MI), chair of the House Energy and Commerce Committee; and Rep. Henry Waxman (D-CA).

The bill synthesizes SGR repeal plans concocted separately last year by the Senate Finance, House Ways and Means, and House Energy and Commerce committees. The proposal from the Senate Finance Committee was the least popular with organized medicine because it would have frozen Medicare rates at their current level for 10 years. The 2 House bills, in contrast, included slight raises.

Organized medicine was quick to praise the latest bill. Ardis Dee Hoven, MD, president of the American Medical Association, called it a "critical step toward reforming the nation's Medicare program" in a news release. Charles Cutler, MD, chair of the board of regents of the American College of Physicians, issued an even heartier endorsement, saying that the college "strongly supports" the measure.

Thumbnail Sketch of Pay-for-Performance in Medicare

A summary of the bill released today sketches out how Medicare would pay physicians for the quality rather than the quantity of their services in the future.

  • Physicians would receive a 5% bonus if a significant amount of their Medicare revenue comes from an "alternative payment model" (APM) such as an accountable care organization or a patient-centered medical home. "Participants need to receive at least 25% of their Medicare revenue through an APM in 2018-2019," a threshold that would increase in subsequent years. The bill would establish a special committee to study and recommend APMs developed by physicians.

  • Medicare would financially reward care-coordination of patients with chronic conditions.

  • Medicare would introduce physician-authored guidelines for clinical care to reduce inappropriate treatment that is detrimental to patient health and the federal budget.

  • Pay-for-performance would rely on quality measures developed in "close collaboration with physicians and other stakeholders."

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