Democrats set aside queasiness over increased costs for higher-income Medicare beneficiaries that will raise nearly $35 billion through 2025 and potentially set a precedent for future program restructuring and benefit reductions backed by Republicans. They also were nervous about barring Medigap policies without deductibles. Those concerns were partly mitigated by a provision in the bill making permanent a program that provides premium assistance to low-income Medicare beneficiaries.
Hospitals support the legislation despite facing nearly $20 billion in cuts to anticipated spending over a decade. “It was inevitable that some of this package was going to have to be paid for, and I think this was probably the best possible agreement out there that we could get,” said Tom Nickels, the American Hospital Association's senior vice president for federal relations.
The legislation increases payments to physicians by 0.5% annually for the next four years. After that rates will remain flat for six years. Then payments for most physicians will increase by 0.25% annually.
Joe Antos, a healthcare policy expert at the conservative American Enterprise Institute, scoffed at the idea that this will end the debate over Medicare payments to doctors. “If you really think docs are going to be thrilled with a 0.5% increase, you are insane,” he said. “This is the beachhead.”
But the SGR repeal-and-replace bill also establishes a two-track payment system in hopes of prodding doctors to move toward value-based payment models such as accountable care organizations and bundled payments. Physicians who have at least 25% of their Medicare revenue tied to such payment models in 2019 will be eligible for 5% bonuses.
“That's nothing to sneeze about,” said James Reschovsky, a senior fellow at Mathematica Policy Research. “I can't predict how big an impact it's going to have. There's a lot that is pushing physicians in that direction already.”
In January, HHS Secretary Sylvia Mathews Burwell set a goal of tying half of all spending in traditional Medicare to contracts with incentives to manage quality and cost. But experts warn that designing measurements for meeting those targets across different types of providers will be challenging. “There are big questions about how it's going to work and what kind of pressures it's going to create for physicians,” said Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities.
Backers of the physician-payment changes received a boost when the Congressional Budget Office determined that they would save $900 million over a decade compared with keeping doctor payments flat. That comparison made logical sense because annual physician fee changes have ranged from flat to a 2.2% increase since Congress in 2003 started passing temporary doc fixes to override SGR-based cuts.
But the Senate's failure to act last week raises the prospect of more lobbying and more meddling with the package when the upper chamber reconvenes. For example, advocates of extending CHIP for four years rather than two still plan to promote their cause.
“Senators aren't used to being presented with a take-it-or-leave-it proposition from the House,” said John Rother, president of the nonpartisan National Coalition on Health Care, which supports the package. “But I do think that it will pass because of the House vote.”