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.
With all the enthusiasm and energy to get rid of the flawed system that Medicare uses to pay physicians, why isn’t it gone yet?
A huge obstacle is the price tag. The Congressional Budget Office has estimated that simply repealing the current payment formula for 10 years would cost $116.5 billion over that time. A House Energy and Commerce Committee bill to replace it would cost $153.2 billion over 10 years.
Nonetheless, lawmakers from both chambers and both parties during the past few months inched closer than ever to their longtime goal of tossing out the hated “sustainable growth rate” formula. They want to replace it with an approach that would implement more stable and predictable reimbursements.
But their work on a permanent solution will have to continue into next year, given that there are just a few days left in the 2013 session. With time running short, providers are now urging Congress to act to at least block the approximately 24 percent rate cut that will take effect on Jan. 1 — a short-term “doc fix.”
Lawmakers have not given up on a long-term replacement, though. The Senate Finance Committee has scheduled a Thursday markup of the joint legislative framework it has developed with the House Ways and Means Committee, which is also expected to hold a markup this week.
But expectations are that the proposal will move onto the 2014 agenda. It would be a long shot for lawmakers to approve that bill, reconcile it with the Energy and Commerce bill (HR 2810) and have both chambers pass the new legislation all before recess.
The likely short-term patch could last only three months, which would buy a little time for lawmakers to work out an agreement on the replacement legislation. Some stakeholder groups are urging that it not be any longer than that, so as not to lose momentum.
Ardis Hoven, president of the American Medical Association, said the group would support a short fix but that it would be “irrational” to “support a bad policy for another year.”
“To get a landmark bill to the finish line early next year, the AMA supports a very short term ‘bridge’ to stop the looming 2014 Medicare payment cut for just a couple months,” Hoven said in a statement.
Provider groups and lawmakers have for years derided those temporary patches, saying they merely spend money on continuing bad policy.
In addition, the uncertainty over the payment rates prevents physicians from making investments in their offices, and can lead some to stop seeing Medicare patients, provider groups say.
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.
The momentum for real legislative action was growing at the time. The next year, the Senate Finance and Budget committees and the House Ways and Means and Energy and Commerce committees all held hearings to brainstorm ways to get rid of the SGR.
In addition, Pennsylvania Democratic Rep. Allyson Y. Schwartz and Nevada Republican Rep. Joe Heck introduced a bill to repeal it and begin a series of demonstration programs to find a replacement system.
In early 2013, members of Energy and Commerce and Ways and Means took a big step by outlining a framework to replace the SGR system. After receiving provider input and holding hearings on the framework, Energy and Commerce approved its version in July. In October, Ways and Means introduced a somewhat different joint framework with Finance.
That progress — the most in years — has both stakeholders and lawmakers excited.
“There is unprecedented bipartisan momentum in Congress for signing a bill into law that will repeal the broken Medicare payment formula,” Hoven said.
American College of Physicians President Molly Cooke said in a statement that her group is “greatly encouraged” by the committees’ progress.
Provider groups have also praised many of the changes made to the Senate Finance and House Ways and Means committees’ joint framework.
What remains to be seen is whether — and how quickly — members can take the different proposals, combine them and find acceptable offsets to get a final measure to the president’s desk.
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.