Healthcare Business News

Reform Update: Despite praise, SGR repeal will require cuts or payment reforms to move forward

By Andis Robeznieks
Posted: February 7, 2014 - 3:30 pm ET

With hospitals vehemently opposed to more Medicare cuts to fund the bipartisan legislation unveiled Thursday that would permanently end the annual charade around physician pay cuts, Congress may have to enact some form of payment or tax reform if it expects to get the job done this year.

Physician groups already are hailing the SGR Repeal and Medicare Provider Payment Modernization Act, which would eliminate Medicare's sustainable growth-rate formula, which on March 31 mandates an automatic 24% across-the-board cut in physician pay. But the big question on the table is how to pay for its $126 billion price tag.

“Everyone wants to go home and say 'We fixed this thing,'” said healthcare consultant and policy analyst Paul Keckley.

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The SGR was enacted as part of the 1997 Balanced Budget Act and linked physician fees to growth in the U.S. gross domestic product. It included a “clawback” mechanism for rolling back fees if spending exceeded the previous year's budget targets. But cutting physician payment has never been a politically popular move. So, starting in 2003, Congress enacted a series of legislative “patches” to prevent the cuts from taking place resulting in deeper cuts being threatened every year which required more expensive patches each time.

Over the past decade, the mounting patches have cost taxpayers $153.7 billion (PDF), according to the American Medical Association.

Few palatable options are on the table to pay for a permanent doc-pay fix. Sen. Ron Wyden (D-Ore.) has introduced bipartisan legislation that aims to lower costs by better coordinating the care for the sickest 5% of Medicare beneficiaries. While the Congressional Budget Office has not calculated or “scored” the savings from the Better Care, Lower Cost Act, the senator claims it could save as much as $25 billion a year, which would probably more than pay for a permanent fix.

“That one has a lot of positive momentum among fiscal conservatives on both sides of the aisle,” Keckley said. But until the CBO releases its own score on the legislation, its attraction as a SGR pay-for would be limited.

The CBO has listed numerous other options in a report released last November. It noted that the tax exclusion of employer-provided healthcare benefits cost the federal treasury $250 billion in 2013. There's an outside chance scaling that back slightly to pay for a doc-fix could gain traction since a recent Republican healthcare reform alternative proposed limiting the tax exclusion to pay for tax credits for the uninsured.

There were 16 healthcare-specific suggestions listed in the CBO report as options for lowering the deficit, not paying for an SGR-repeal. Most are politically charged and would not necessarily produce much benefit.

Raising the Medicare eligibility age to 67 years old, for example, would reduce the federal deficit by $19 billion over the next 10 years, according to the CBO. While savings would be higher for Medicare alone, the total effect on the budget is diminished because costs would merely be shifted to other programs such as Medicaid.

Dr. Robert Berenson, senior fellow at the Urban Institute, said major policy shifts or payment restructuring could be possible as part of an overall Medicare reform package, but not as a one-item budgetary measure. “No one is going to raise the eligibility age to pay for an SGR fix,” he said.

Another deficit-reduction option the CBO scored that would offset the price of repealing the SGR is phasing in higher premiums for Medicare Part B and D. Beneficiaries currently pay $104.90 and $31.70 a month respectively for physician services and prescription drugs. If those figures were elevated to $260 and $63 a month, it would reduce the federal deficit by $274 billion over the next 10 years.

Part D also was targeted in an option that would require drugmakers to pay rebates to Medicare much like they do for Medicaid. According to the CBO, this could knock $123 billion off the federal deficit. Sen. Jay Rockefeller (D-W.Va.) has introduced legislation that would enact Medicare drug rebates for dual-eligible beneficiaries and he has specifically identified his bill as an SGR-repeal pay-for.

But the bill, which Rockefeller said would generate $141.2 billion over 10 years, has sat in committee since last April.

Healthcare consultant Brian Ahier, president of Advanced Health Information Exchange Resources in The Dalles, Ore., noted how the hospital sector is already pushing back against being footed with the SGR-repeal tab and expects the pharmaceutical industry to do the same.

“There could also be proposals for offsets in the pharmaceutical industry such as changes to the Medicare Part D rebate program and perhaps reducing the market exclusivity period for biologics—but the pharmaceutical industry would lobby hard against that,” Ahier said. “No matter what the proposal, there will be opposition, and this being an election year, I expect campaign coffers from all sides will benefit from the debate.”

Mont. Lt. Gov. Walsh will serve remainder of Baucus' term

The Senate's confirmation of Sen. Max Baucus (D-Mont.) as ambassador to China on Thursday set in motion the steps to fill the seat of the Montana Democrat, who was one of the primary architects of the Patient Protection and Affordable Care Act. On Friday, Montana Gov. Steve Bullock, a Democrat, appointed the state's Lt. Gov. John Walsh to be sworn in Feb. 11. Walsh, 53, is a decorated military leader for his service in Iraq from 2004-2005. He will serve the remainder of Baucus' term, which ends when the new Congress is sworn in next January. Walsh announced his candidacy for the seat last year after Baucus said he would retire, and it's expected that he will continue his campaign to win a full term. Sen. Ron Wyden (D-Ore.) is expected to take over next week as chairman of the Senate Finance Committee, a crucial position as lawmakers hammer out the details on legislation to repeal and replace the SGR. —Jessica Zigmond

Committee backs bill to repeal reform's 30-hour rule

This week the House Ways and Means Committee voted 23-14 to approve a bill that would repeal the Patient Protection and Affordable Care Act's 30-hour definition of full-time employment and restore the traditional definition of 40 hours. The Save American Workers Act was introduced last year by Rep. Todd Young (R-Ind.). House Ways and Means Committee Chairman Dave Camp (R-Mich.) said in a statement that the healthcare law is putting full-time work and the opportunity to earn more money out of reach for millions of Americans. “Repealing the 30-hour rule is a necessary step to get Americans working again,” Camp said. No Democrats supported the measure. —Jessica Zigmond

Sebelius plans visit to Indiana

HHS Secretary Kathleen Sebelius will head to the nation's heartland Monday to visit a Republican-led state that has so far declined to expand Medicaid under the Affordable Care Act: Indiana. Sebelius is scheduled to make an announcement about enrollment and outreach in healthcare coverage in the Indianapolis area. She will join Rep. Andre Carson (D-Ind.) and Kathleen Lee, chancellor of Ivy Tech Community College's Central Indiana Region at the Ivy Tech Corporate College and Culinary Center. Sebelius is also expected to talk about in-person assistance available in the area through organizations such as the Affiliated Service Providers of Indiana, or ASPIN, who help people choose and enroll in coverage options under the ACA.—Jessica Zigmond

Follow Andis Robeznieks on Twitter: @MHARobeznieks

Follow Jessica Zigmond on Twitter: @MHjzigmond

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