The biggest obstacle to fixing the flawed system that Medicare uses to pay physicians is the price tag. The CBO estimates that repealing the current payment formula would cost $116.5 billion over 10 years.
The CBO’s cost estimate, though still steep, is part of what prompted lawmakers to look seriously this year at replacing the payment formula. The latest estimate, released Dec. 6, looks like a bargain compared to last year’s, when the CBO said repealing the SGR for 10 years would cost $244 billion.
In addition, that most recent estimate is even lower than the CBO estimated earlier in 2013, when it said a 10-year repeal would cost $139.1 billion over 10 years. And even that score was low enough for provider groups to strongly urge lawmakers to seize the opportunity for a permanent repeal.
Lawmakers have not yet publicly discussed offsets for their replacement measures. But the lower price, and the extensive bipartisan work done in the committees, give stakeholders hope that this year will be different.
Still, lawmakers of both parties are insisting that the cost of replacing the SGR be somehow offset. In November, 259 House members wrote a letter to House leadership stating their commitment to permanent repeal with “fiscally responsible offsets.”
Over the years, the SGR dance steps have grown familiar. As each “doc fix” expiration date draws closer, physician groups lobby members of Congress. Lawmakers pledge to come up with a better solution — and then implement one more patch.
How did Congress get to this point? It began with good intentions, creating the SGR formula as part of a 1997 balanced budget package (PL 105-33) to help curb the growth rate of Medicare spending. The formula calls for automatic cuts in Medicare’s reimbursement rates for doctors when the growth rate of provider costs exceeds the growth rate of the economy.
The formula has called for cuts in doctor payment rates since 2002. Although Congress allowed the first cuts to take place, since then doctors’ lobbying has prompted lawmakers to block the reductions.
Without those interventions, Medicare payment rates would have declined steadily. But allowing them to take effect now, all at once, would be much steeper than if the cuts had come in stages for the past several years. The cumulative cost of stopping the cuts has also grown over time.
After several years of doc fix measures, lawmakers saw an opportunity in 2009 to address the problem along with the health care overhaul legislation. House Democrats passed a bill to repeal the SGR that included language saying that any new spending should be offset.
Senate Democrats, however, proposed an SGR repeal bill that did not include an offset, and moderate Democrats rebelled and joined Republicans to block the bill from coming to the Senate floor.
Congress ended up passing a final health care overhaul measure (PL 111-148, PL 111-152) that did not address Medicare physician payment rates, and 2010 alone saw five different doc fix patches.
In 2011, lawmakers promised once again to fix the system, and solicited proposals from medical specialty groups on how to do so. Many of the plans centered on enacting a series of stable payments for five years, while doing demonstration projects to find a new payment method. Still, there was little talk of offsets.
Physician groups also made a major lobbying push for the joint deficit reduction supercommittee to come up with a new Medicare payment proposal, but ended up disappointed.
Vice President Joe Biden waits to conduct a mock swearing-in ceremony with Sen. Brian Schatz, D-Hawaii, in the Capitol's Old Senate Chamber, December 2, 2014. Schatz was sworn in to serve the remainder of his term since he was appointed to the seat after Sen. Daniel Inouye, D-Hawaii, passed away.