Congressional leaders and President Barack Obama announced an agreement that will keep the federal government operating through the first quarter of 2013, but the agreement does not include adjusting or repealing the sustainable growth-rate Medicare payment formula—which a new Congressional Budget Office analysis says will require a 27% cut in physician payments next year.

Estimates of the SGR-driven Medicare payment cut have gone as high as 30%, and the CBO report analyzes several short-term options with price tags of $15.3 billion to $376.6 billion in additional spending between 2013 and 2022.

According to a news release from Senate Majority Leader Harry Reid (D-Nev.), the federal budget agreement calls for a continuing resolution that will provide about $1.05 trillion to fund government operations for six months. Reid's office told Modern Healthcare that the SGR—as well as Medicare hospital supplemental payment extensions—are not included in the continuing resolution.

A release from House Speaker John Boehner (R-Ohio) noted that the resolution hasn't been completed yet, but the plan is to work on it through August and to present the president with a finished bill that he will sign in September.

"The agreement reached by House and Senate leadership to fund the government through the first quarter of 2013 is a welcome development, and we are encouraged that both sides have agreed to resolve this issue without delay,” a statement from the White House press secretary's office read. "The President has made clear that it is essential that the legislation to fund the government adheres to the funding levels agreed to by both parties last year, and not include ideological or extraneous policy riders."

In its report, the CBO noted that its estimates are likely to change when the Medicare physician fee schedule is issued in November.

The lowest cost estimates released by the CBO call for short-term Medicare payment increases followed by payment reductions, also known as "cliffs," ranging from 22% to 26%.

The report also gives estimates for "claw-back" approaches, which include short-term increases in payments without adjusting spending targets under the assumption there would future recoupment of money that was spent above the targets. These options call for spending increases of $93.7 billion to $193 billion.

The most expensive options involve replacing, restructuring or "resetting" the SGR.

"Options that 'reset the SGR' would keep the SGR mechanism in place but would reset some of its parameters," the report stated. "They would forgive all spending that has accrued above the cumulative targets and set both the cumulative target and cumulative spending to zero as of December 31, 2011."

Cost estimates for these options ranged from $271 billion to $376 billion.