Is Congress really serious about fixing the SGR this time?

The Medicare Sustainable Growth Rate (SGR) formula has long been a thorn in physicians’ sides. Initially created to rein in the growth of Medicare spending by tying reimbursements to U.S. economic output, the formula is widely accepted by physicians as a failure.

For years there’s been discussion in Congress about fixing the flawed SGR, but legislators have never been able to agree on a solution.

Instead, each year Congress postpones the scheduled reduction in physician reimbursement to avoid draconian cuts only to face the same problem the following year. The last postponement was made in December 2012 to avoid a 27% reduction in physician reimbursement that was scheduled to take effect January 1, 2013.

But now, serious proposals are on the table to replace the SGR formula, with both Republicans and Democrats working together to reach a solution to this long-standing problem.

“It used to be you’d say ‘SGR’ and their eyeballs would roll,” says Jeff Cain, MD, president of the American Academy of Family Physicians (AAFP). “But right now, we are hearing bipartisan support in the House, and also in the Senate.”

What’s different this time around? For starters, the price tag attached to fixing the SGR problem has dropped considerably.

“A lot of people are calling it the SGR fire sale, because it’s projected to be so much cheaper to fix now than it was in past years,” says David A. Lipschutz, policy attorney with the Center for Medicare Advocacy, Inc. in Washington, DC.

At one point scored by the Congressional Budget Office (CBO) at nearly $300 billion over a 10-year period, the price tag for doing away with the SGR is now $139 billion.

“I think this has encouraged both parties to go forward and feel that this is their best opportunity,” says Bob Doherty, senior vice president of the American College of Physicians (ACP) Division of Governmental Affairs and Public Policy.

The other big push to reach an agreement is that this “fire sale” is likely time-limited. The CBO is scheduled to update its cost estimate in the fall, putting pressure on Congress to act now before the price for fixing the SGR potentially goes up.

“The CBO scoring process is rather opaque even to the people on the Hill…nobody is quite sure that you can bank on the CBO keeping the score as low as it is now,” Doherty says. “The price could remain the same, could go up, or could go down. We just don’t know.”

Plans on the Table

Republicans in the House Energy and Commerce Committee recently released an update to a draft bill to repeal and replace the SGR.  The proposed plan has three phases:

Phase 1.  SGR is repealed. Payments are stabilized for a period of 3 to 5 years, and providers continue to be paid on a fee-for-service basis.

In addition, “peer cohorts” are established in which providers self-select into categories representing those who treat similar patient populations. A set of core competencies for each peer cohort is developed and measured.

“If you did well in achieving those competencies and the associated measures, you would get an incentive update above the baseline update,” Doherty says. What that baseline would be has yet to be established.

Phase 2. Payments to physicians are based on their ability to meet quality measures. Understandably, physician groups are concerned about what those measures will look like, and that they will play a major role in determining the standards to which they’ll be held accountable. “This is all in play right now,” Cain says. Thus far, physician groups such as the AAFP, ACP and the American Medical Association (AMA) are helping to craft the bill.

Phase 3. Providers have the option of participating in alternative payment models, such as Accountable Care Organizations (ACOs) and Patient-Centered Medical Homes (PCMHs), which foster better coordination of care between primary and specialty care providers.

“We think those models are ready to go, and we are pleased that they were referenced in the draft Energy and Commerce language,” Doherty says. He adds that ACP would be happy if greater specificity was written into the legislation to enable physicians who have already adopted these models,  which are consistent with provisions under the Affordable Care Act (ACA), qualify immediately for higher incentive updates.

What’s not been spelled out in the House Energy and Commerce Committee’s plan are details explaining how providers would move from one phase to another, or how the quality measurements would correspond with payment.  Also unclear is how to incentivize alternate payment models.

Another proposal on the table is a re-evaluation of the current Relative Value Unit (RVU) system with an emphasis on increasing the value of primary care services. That would mean paying for things such as care coordination and care transitions, and more for time spent by primary care providers explaining treatment options-services that play a critical role in good patient care but are not currently reimbursed. 

Understandably, Cain says the AAFP supports an increase in pay for primary care. “Recent studies have shown that the complexity of care at a primary care office has been undervalued when compared with other specialty work,” he says. “That’s because as our population ages and there are more chronic diseases, the kinds of things that family doctors and primary care internists are expected to treat in their office is more complex than is currently recognized. So we are also advocating for a separate set of codes for primary care that reflect that increased value.”

Gaining agreement to increase primary care reimbursement while holding specialist pay steady could be an uphill battle, Lipschutz says. “Feedback that we’ve gotten from some staffers on the Hill is that it’s going to be very difficult to get buy-in from specialists on this issue.”

Also challenging will be getting buy-in from the Congressional Doctors’ Caucus, Lipschutz says. “A lot of the folks on that caucus are looking at this effort as a means to introduce other things not related to Medicare payment, such as tort reform, instituting more private contracting in Medicare, and getting rid of prohibitions on balance billing individual beneficiaries,” he says. 

Alternate Plans

Pennsylvania Democrat Allyson Schwartz and Nevada Republican Joe Heck, DO, have also introduced a bill to repeal and replace the SGR. The Medicare Physician Payment Innovation Act of 2013 puts a greater emphasis on moving physicians toward new payment and delivery models.

According to Lipshutz, Congresswoman Schwartz has been a long-time proponent of fixing the SGR, and has very recently been critical of the proposal that has come out of the House Energy and Commerce Committee, saying that it doesn’t go far enough to move us away from the current fee-for-service system.

The Schwartz-Heck bill “lays out a very clear timeline from where we are right now, to a system where the SGR is completely gone, and that most physicians would be expected to be in a new alternative payment model,” says Doherty.

Between 2014 and 2018 the Schwartz-Heck bill stabilizes payments to physicians. “During that period of stability, the Secretary of Health and Human Services would follow a process that’s spelled out in the legislation to evaluate a variety of different payment models that would be suitable to physicians in all specialty areas, and at the end of that period of stability, those new models would be finalized,” Doherty explains.

At that point, the expectation is that physicians would have adopted one or more of the new models. Those who decline to participate in any of the new care delivery and payment models would see reduced fee-for-service reimbursement.

Despite the differences in the bills, Doherty says there’s more cooperation than dissention at this point. Both the Senate and the House seem to be working together across the aisle on a bipartisan basis to come up with a proposal, he says. And, in spots where the bills diverge, he sees opportunities to bridge the gaps.

Paying for SGR

No doubt one reason cooperation has been high to this point is because discussions about how to pay for the SGR fix have yet to take place. “I think the tenor will change when the conversation moves to the ‘pay-fors,’ ” Lipschutz says.

As Congress looks to plug a financial hole to pay for any new piece of legislation there’s a tendency to go back to proposals that have already been scored by the CBO. The fear, Lipschutz says, is that Congress will pull something off the shelf to meet a budgetary number, without real regard to the impact that it’s going to have. “Our huge concern is that in order to pay for this legislation, they’re going to adopt policies that would just shift cost onto the beneficiaries,” he says. 

The same committees that are working on the SGR fix have also held a series of hearings on bipartisan Medicare reform proposals that touch on things like adding a home health copayment where there currently is none, increasing the Part B deductible, further means-testing Medicare Parts B and D premiums, and altering Medigap plans. “They’re not drawing the connection. They’re having hearings on this, but they’re not saying, we’re going to use this to pay for SGR, but that’s what everyone really thinks is likely to happen” Lipschutz says.

The bottom line, Doherty says, is “somebody’s offset is somebody else’s ox being gored, so once you start naming offsets, you’re going to get opposition.”

 “The question is, do we have the political will to move it forward? We’ll see,” Cain says.

He’s optimistic about the level of understanding that the SGR is a broken system and the apparent enthusiasm to fix it. Still, Cain says, “We are challenged by a House and Senate that have been having difficulty working together in the last couple of years. We agree it’s broken, now let’s get together. This is why we elected our leaders,” he says.