Could this be the Congress that repeals the SGR?

Physicians are hoping that current talks in Congress and supportive words in President Obama’s budget can produce a bipartisan solution to what has seemed to be a never-ending problem: the Sustainable Growth Rate (SGR) formula driving severe reductions in Medicare reimbursement rates for physician services. 

Over the past several years, both the House and Senate Committees with jurisdiction over Medicare have struggled with how best to reform Medicare reimbursement for physician services.  But, due to the significant cost to repeal the SGR formula and the difficulty in finding agreement on how best to pay for it, Congress has only been able to pass short-term freezes in physician fees.  This process of waiting until the last minute to prevent significant reductions in payment from occurring has gone on for years, making it difficult for physicians to plan ahead and manage their practices.

The change starting early this year is the approach taken by the Chairmen of the House Energy and Commerce and Ways and Means Committees who, together, have been working on a proposal to reform the physician payment system and are actively seeking input from the physician community.  An outline of the proposal was first presented to representatives of medical societies in February.  Organizations were asked to comment on the outline and to respond to specific questions.  A revised proposal was released on April 13 and physician input was requested again.

The proposal contains three phases with the following major elements:

• Phase I - Repeals the SGR formula and establishes a period of stable and predictable updates in physician fees that will be set in statute

• Phase II – Creates an Update Incentive Program where payment will consist of a base rate (as established in phase I) and a variable rate tied to performance on quality measures and clinical improvement activities.  Quality measures will be both outcomes and process measures that are risk-adjusted and will include measures developed by specialty societies.  Committee staff has suggested that the variable rate would represent a minimum of 10% - 15% of physician payment.

• Phase III – Provides incentive payments based on efficient use of resources added to the base and quality incentive payment rates.  Physicians would report efficiency measures that could be episode-based or could include per capita measurements for costs of care and would be risk-adjusted and take into account geographic differences.

• The proposal also provides for an opt-out for physicians participating in alternative payment models approved by CMS such as Accountable Care Organizations (ACOs), bundled payments or medical homes. 

While not endorsing the proposal directly the President’s budget states the Administration’s support for repealing the SGR and providing for a period of stability for physician reimbursement.  The two House Committee Chairs are also hopeful that their colleagues in the minority will support the proposal.  They hope to release legislative language this summer; that is when many details will be fleshed out.  A proposal from the Senate Finance Committee is yet to be released publicly, but the Committee is just as interested in ending the SGR problem as their House colleagues.

Adding to the likelihood that the SGR could be addressed this year, in February the Congressional Budget Office (CBO) released an updated budget projection of the cost of repealing the SGR in its Budget and Economic Outlook: Fiscal Years 2013-2023. Due to lower than expected growth in Medicare spending the new cost of freezing physician payments for ten years is $138.3 billion, more than $150 billion less than the projection of $316 billion in 2012. 

The lower cost estimate will help with the difficult task of finding offsets but, more importantly, the focus of the legislation can be on how best to reform the fee for service system for physicians.  In this non-election year, it may even have a chance of getting done.

Ellen Riker
Senior Vice President

Lisa Ellington

Big Thinkery, LLC, 1011 Kenilworth Court Northwest, Concord, NC, 28027