House Energy and Commerce Committee passes legislation to repeal, replace SGR

It's Christmas in July for Medicare-participating physicians—though the gift is far from being delivered. On Wednesday, the House Energy and Commerce Committee unanimously passed bipartisan legislation to repeal Medicare's sustainable growth-rate formula (PDF) and replace it with a stable system of payments to the nation's physicians.

For years, Congress has waited until the end of the calendar year to stave off a steep Medicare payment cut to physicians with a temporary fix. But Energy and Commerce Committee members attempted to tackle the contentious issue earlier this year when they voted 51-0 to approve the bill, the culmination of more than two years of work involving members of the House Energy and Commerce and Ways and Means Committees, as well as feedback from healthcare providers.

The big catch is the bill offers no way to pay for repealing the SGR, which the nonpartisan Congressional Budget Office estimated earlier this year would cost about $139 billion over 10 years—a much lower cost than in previous years due to the decline in Medicare cost growth. The pay-for part undoubtedly will involve a fierce battle among healthcare industry sectors, none of whom want to be nicked.

House Energy and Commerce Chairman Fred Upton (R-Mich.) said in a news release that the panel's vote is a milestone. He said, “we are all resolved to achieve reform in a fiscally responsible manner, and despite our significant progress, we will not be satisfied until the ink is dry on the president's signature.” The Ways and Means Committee continues to work on a permanent repeal of the SGR, according to a staff member for the majority side of the committee.

Passed by the House Energy and Commerce Health Subcommittee last week, the bill would permanently repeal the SGR and provide an annual statutory payment update to physicians of 0.5% per year from 2014 through 2018. Starting in 2019, providers would continue to receive that annual 0.5% update, and those practicing in fee-for-service would receive an additional update adjustment based on quality performance under a new update incentive program, or UPI. High-performing providers—meaning those who achieve a certain threshold—would have the chance to earn a 1% bonus payment based on previous performance, while low-performing providers would see a 1% reduction in payments.

“What's significant about this activity as opposed to previous years is something has begun to move through the process much earlier in the year,” said Anders Gilberg, senior vice president of government affairs at the MGMA. “That said, it's going to be critically important what the (House) Ways and Means Committee and Senate Finance Committee want to do on this issue, and how the leadership of both houses will seek to advance this legislation, which includes the pay-fors.”

Gilberg added that he thinks it's likely that the SGR repeal bill will be swept up into some larger budget bill later this year, especially because it's rare for legislation with such a hefty price tag to pass on its own. But Congress remains deadlocked on those larger budget issues.

“People are generally pleased that it repeals the SGR,” Gilberg said, “But the quality provisions are quite lengthy and complex and we're concerned about the redundancy with existing programs,” he added. “I don't think we're finished refining this legislation by any means.”

Follow Jessica Zigmond on Twitter: @MHjzigmond