Repealing SGR Will Cost $180 Billion, CBO Estimates

Mark Crane

March 20, 2014

It will cost more than $180 billion over the next 10 years to repeal Medicare's sustainable growth rate (SGR) and extend certain Medicare programs under a bill the Senate is expected to vote on next week, according to the Congressional Budget Office (CBO).

The new CBO estimate, released Wednesday night, is $41 billion higher than the previous price tag that was calculated solely on the repeal of the SGR, which threatens to cut doctors' Medicare reimbursement by nearly 24% on April 1 if Congress doesn't act. The higher estimate is because of the Medicare program extensions.

The Senate bill also would help move healthcare away from fee-for-service and toward value-based reimbursement. The measure would give all physicians who participate in Medicare a 0.5% annual raise for 5 years, from 2014 to 2018. For the next 5 years, their base rates would be frozen.

The Republican-controlled House of Representatives passed a bill last week aimed at repealing the SGR, but it contains an amendment that would delay for 5 years the financial penalty imposed on individuals if they don't purchase health insurance under the Affordable Care Act. The Democratic-controlled Senate is unlikely to agree with delaying the penalty.

The CBO estimated that the delay would increase the number of uninsured Americans by about 13 million in 2018.

Congressional leaders still haven't decided on how to pay for the cost of repealing the SGR. Unless there is a compromise, it's likely that Congress will have to pass a last-minute fix as it's done repeatedly over the past decade. That means the 24% reimbursement cut takes effect April 1.

The Senate bill also provides funds to extend several expiring Medicare programs, such as outpatient therapy caps, ambulance add-on payments, and the low-volume hospital adjustment. The bill doesn't state how it would pay for the SGR fix or the extenders, a point of contention with the House of Representatives.

Leading medical societies support the SGR replacement legislation because the controversial payment formula has been threatening the income of most physicians since it was introduced in 1997. Although Congress has enacted a series of "doc fixes" to put off legally required pay cuts since 2003, none of these patches has reassured physicians that they won't be facing significant pay cuts year to year.

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