On February 6, the House Ways and Means Committee, House Energy and Commerce Committee, and Senate Finance Committee introduced a bi-partisan/bi-cameral bill to repeal the Medicare Sustainable Growth Rate (SGR) effective April 1, 2014. H.R. 4015. The Medicare Provider Payment Modernization Act consolidates three previously passed bills by each committee into a single framework to repeal and replace the flawed SGR.
If Congress fails to enact either a short-term SGR patch or a long-term SGR replacement policy prior to the end of March, an automatic cut in Medicare physician payments of approximately 24% will occur on April 1st.
Although H.R. 4015 goes into great detail on what would replace the SGR, the bill, does not include provisions for how to pay for the repeal. The latest Congressional Budget Office estimates are that repealing the SGR would result in increased federal expenditures from the Medicare Trust Fund amounting to $120 Billion over the next 10 years.
Under Congressional rules, any legislation that seeks an increase in federal spending on entitlement programs such as Medicare, beyond the amounts included in the current 10-year budget cycle, must be accounted for through higher revenues into the Medicare trust fund or less spending elsewhere in the Medicare program of an amount equivalent to the “new” spending or a combination of the two (additional revenue and spending reductions).
In addition to formally repealing the SGR, the bill:
- Authorizes annual automatic 0.5% payment update for five years (2014 – 2018).
- Consolidates the three existing Medicare quality programs into a single value-based incentive program.
- Provides incentives for providers to switch to alternative payment models (APMs) such as a 5% bonus to providers who receive a significant portion of their revenue from an APM.
Congress has historically passed short-term SGR fixes to prevent drastic cuts to the Medicare physician fee-schedule. The current short-term fix delays a 24% reduction in Medicare physician fee-schedule payments. Congress has until March 31, when this fix expires, to either pass a permanent fix or another temporary fix (aka SGR Patch) to give them more time to complete action on a permanent fix.
How to pay for the SGR fix has vexed every Congress for more than a decade.
As part of the repeal/replace initiative, Congressional staff released a list of possible “offset” options that could be used. NONE of these has been formally endorsed. These are merely options that could be considered.
Some of these possible offsets include:
- Aligning Medicare drug payment policies with Medicaid’s.- Eliminating Exchange subsidies for people with income over 300 percent of the federal poverty line.
- Reduce payments to Critical Access Hospitals (CAH) to 100% of costs.
- Equalize payments for certain conditions treated in inpatient rehabilitation facilities and Skilled Nursing Facilities (SNF).
- Adjust Payment updates for certain post-acute care providers.
- Increase income related premiums under Medicare Parts B & D.
Thank you to Bill Finerfrock, Matt Reiter, and Zhaneta Mansaku for contributing this article.
