Washington—The possibility of Medicare’s sustainable growth rate (SGR) formula being repealed continues to strengthen in Washington following release in February of a new report by the Congressional Budget Office (CBO) that cut the estimated cost that would be incurred by nearly 50%.
According to that report, lower-than-expected growth in Medicare physician spending has slashed the estimated 10-year cost of repealing the SGR formula to $138 billion, down from last year’s $244 billion projection. That lower price tag has spurred new calls for repeal and prompted new legislation on Capitol Hill.
In addition, the budget proposal released by Senate Democrats for fiscal year 2014 assumes repeal of SGR and elimination of the 26.5% physician pay cut that would be trigged if the formula remains intact. It also assumes rollback of the 2% Medicare rate cut imposed by sequestration.
In the House of Representatives, however, the budget proposed by Budget Committee Chairman Paul Ryan (R-WI) would establish a “reserve fund” that would allow Congress to repeal the cuts required by the SGR in a deficit-neutral manner. It does not specify how policymakers would offset the cost, and if Congress fails to find a solution, the Ryan plan assumes the SGR cuts will take effect.
MedPAC: Act now
Furthering the support for repealing SGR was the Medicare Payment Advisory Commission (MedPAC), which said in its March report to Congress that the lower CBO estimate underscores the need for action now.
“Repeal is now less costly than it has been for many years, and it could be accomplished—depending on how the Congress decides to finance it—with less burden on physicians, other providers, beneficiaries, and taxpayers,” MedPAC said, adding that repeal should adhere to these principles:
• The link between cumulative fee-schedule expenditures and annual conversion-factor updates is unworkable and should be eliminated.
• Beneficiaries’ access to care must be protected.
• Proposals to replace the SGR must be fiscally responsible.
However, MedPAC cautioned that if Congress looks to Medicare to achieve overall savings for the federal budget, as the Ryan budget seeks to do, it would become more difficult to offset the cost of replacing the SGR.
“At that point, the only option for dealing with an even larger score for SGR repeal may be to add it to the deficit, which may be unpalatable after much effort to get the deficit down,” the report said.
Meanwhile, Rep. Kevin Brady (R-TX), chairman of the House Ways and Means Health Subcommittee, says he wants to work with the House Energy and Commerce Committee, which also has jurisdiction, to repeal the SGR.
In a press release, Brady said he supports permanently repealing the formula and replacing it with a reliable physician reimbursement formula that “rewards quality rather than volume of procedures and tests.”
Legislation would repeal SGR
Brady will have an opportunity to follow through on that goal as Reps. Allyson Schwartz (D-PA) and Joe Heck, DO (R-NV), in February introduced the Medicare Physician Payment Innovation Act, which would repeal the SGR.
“There is no single greater threat to the long-term solvency of Medicare and seniors’ access to health care than the broken Medicare payment system, or SGR,” Schwartz said.
Their bill would:
• permanently repeal the SGR formula
• provide annual positive payment updates for all physicians for 4 years
• ensure access to preventive care, care coordination, and primary care services through increased payment updates for those services
• aggressively test and evaluate new payment and delivery models
• identify payment models to provide options for providers across medical specialties, practice types, and geographic regions
• stabilize payment rates for providers who demonstrate a commitment to quality and efficiency within a fee-for-service model.
Among a significant number of conservative lawmakers, a popular solution for funding SGR repeal, as well as reducing the overall cost of Medicare to the taxpayer, is adopting a “premium support” model, which would provide seniors with an amount of money to purchase either private insurance or opt for traditional Medicare.
Such a proposal is contained in the Ryan budget plan, which also would repeal the Affordable Care Act and thus eliminate the state insurance exchanges that are designed to offer affordable health insurance coverage for individuals and small businesses. According to the Center on Budget and Policy Priorities, the eventual result could mean that many low-income seniors, especially those with pre-existing conditions, would be unable to find affordable health insurance coverage.
However, Ryan’s plan does include two provisions favored by many physician groups, including the AUA: repealing the Independent Payment Advisory Board and placing limits on medical malpractice litigation similar to those contained in H.R. 5, passed by the House on March 22. That measure would cap awards for punitive damages and require that a claimant initiate a claim within a year after he or she discovers or should have discovered an injury.
CBO estimates these changes would lower health and Medicare costs by reducing medical malpractice insurance premiums and reducing the use of health care services because providers would be less fearful of facing a malpractice lawsuit.UT