Budget fights could hinder action on SGR repeal

Momentum is building among House leaders to draft and introduce legislation this year that would repeal Medicare's troublesome sustainable growth-rate formula used to pay physicians, but upcoming budget battles could thwart those efforts.

Industry leaders were surprised on Feb. 5 when the nonpartisan Congressional Budget Office estimated that the new cost to repeal the SGR and freeze physician payments for the next 10 years is $138 billion, a more than 40% drop from its August 2012 prediction of $245 billion. Testifying before the House Energy and Commerce Health Subcommittee hearing this week, Glenn Hackbarth, chairman of the Medicare Payment Advisory Commission, attributed the lower score to a currently low period of growth in utilization of services.

“SGR is on sale now,” Hackbarth said. “But the sale may not last forever.”

In the same week that CBO released its score, House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and House Ways and Means Committee Chairman Dave Camp (R-Mich.) together released a framework that outlines three phases to reform the way Medicare reimburses physicians. The steps include repealing the SGR and providing a period of predictable and defined payment rates; reforming Medicare's fee-for-service payment system to better reflect the quality of care provided; and changing the system in a way that also considers the efficiency of the provided care. According to the committee, industry stakeholders have until Feb. 25 to comment on the proposal.

Dr. Jeremy Lazarus, president of the American Medical Association, told Modern Healthcare he's encouraged not only because of the CBO's recent projection to fix the SGR, but also because activity surrounding the issue is happening so early in the year.

“We had Chairman Upton tell us he was hopeful he'd have a bipartisan bill before August,” Lazarus said. The AMA concluded its annual advocacy conference in Washington this week, where Upton served as a speaker.

Dan Boston, executive vice president and principal at consulting firm Health Policy Source, said House lawmakers on both committees could produce a joint legislative proposal ready by late March with a bill ready for a vote by the August recess.

“As much as there can be an alignment of stars on this issue for them, this is it,” Boston said, referring to both chambers of Congress.

But Anders Gilberg, senior vice president at the Medical Group Management Association, said that while the new CBO estimate created an impetus for Congress to act on this issue, that projection comes at a time when lawmakers are ready to dive into a series of budget battles. He said how lawmakers work together to address upcoming automatic spending cuts—known as sequestration—will serve as a good indicator on whether they can collaborate on fixing the SGR.

“If they can't come together on the sequestration issue,” Gilberg said, “it doesn't bode well for them to do anything on SGR, regardless of the price.”