The Future of the SGR: 2015 and Beyond

Kenneth J. Terry, MA

Disclosures

February 03, 2015

In This Article

Other Ways to Pay (or Not) for the SGR

At the subcommittee hearing, experts and interest groups made their own recommendations about how and how not to pay for the SGR bill.

Richard Umbdenstock, president and CEO of the American Hospital Association, made it clear that AHA members would fight any cuts to hospital payments. "The AHA can't support any proposal to fix the physician payment problem at the expense of funding for services provided by other caregivers," he declared.

Umbdenstock called for combining Parts A and B of Medicare and creating a single deductible of $550, with a cap on out-of-pocket spending of $5500. He said the Congressional Budget Office (CBO) has estimated that that change could net Medicare $52 billion over 10 years. AHA also would increase the income-related premiums already paid by more affluent Medicare beneficiaries; CBO said that could bring in another $52 billion, according to Umbdenstock.

Other commentators, including former Senator Joe Lieberman and Alice Rivlin, a Brookings Institution fellow and co-chair of the Delivery System Reform Initiative of the Bipartisan Policy Center (BPC), also favored more means-testing of Medicare premiums and combining Parts A and B with a single deductible. In addition, Rivlin said, Medicare should limit supplemental Medigap policies, because first-dollar coverage increases health spending.

To cushion the impact of these changes on Medicare patients, BPC would exempt office visits from the combined deductible to protect low-income seniors. Its proposal would also set a dollar limit on out-of-pocket spending by Medicare beneficiaries. And the think tank would use a portion of the revenue from expanding means testing to help low-income beneficiaries.

Don't Shift Cost to Older People!

Naturally, AARP is not buying the idea of shifting more costs to Medicare beneficiaries, as a combined deductible would do. Eric Schneidewind, president-elect of the AARP, said that changes in Medicare policy on prescription drugs could save $150 billion a year. Those changes include letting the Department of Health and Human Services (HHS) negotiate drug prices with pharmaceutical companies—something that Republicans have long opposed.

Rivlin admitted that "finding sufficient offsets will be a heavy lift, and it may prove impossible to find enough. In that situation, a semi-permanent [SGR] fix...would be far better than another 1-year patch."

This approach, developed by Rivlin and her Brookings colleagues, would include a 5-year period of payment stability, costing about $50-$60 billion, which could be paid by raising Medicare premiums on affluent citizens. During this period, the government would give physicians stronger incentives to participate in alternative payment models (APMs) such as accountable care organizations, patient-centered medical homes, and bundled payments, Rivlin said. But she didn't explain how this would lead to a repeal of the SGR.

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