SGR update: ‘Best chance in years’ to reform the flawed payment system

As the annual Medicare Sustainable Growth Rate (SGR) deadline approaches March 31, legislators are once again scrambling to avoid a cut in physician payments, which this year would be about 21%.

Physicians have long lobbied for a permanent fix to the problem, and lawmakers came close last year but couldn’t agree on how to fund it.

This year, House Speaker John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-Calif.) are hinting again that a deal is near. Although talks have been behind closed doors and nothing has officially been introduced, aides and insiders have revealed some information, and it appears as though the new proposal is modeled after last year’s failed repeal, and that it will likely be put to a vote in the coming days.

House Ways and Means Committee Chair Paul Ryan (R-Wis.), Ranking Member Sander Levin (D-Mich.), House Energy and Commerce Committee Chair Fred Upton (R-Mich.), and Ranking Member Frank Pallone (D-NJ) confirmed that that they are making progress in a joint statement last week.

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“Last year, the Ways and Means and Energy and Commerce Committees came together, on a bipartisan basis, to propose a permanent alternative to the broken SGR system. We are now engaging in active discussions on a bipartisan basis-following up on the work done by leadership-to try to achieve an effective permanent resolution to the SGR problem, strengthen Medicare for our seniors, and extend the popular Children’s Health Insurance Program (CHIP).”

The biggest hurdle to repealing the SGR-and the downfall of last year’s attempted fix-is paying for it. The rumored repeal could cost $200 billion over the next decade-with about $140 billion coming from taxpayers. However, members on both sides of the aisle have indicated that not all of the cost of the repeal would have to be covered, due to savings realized by not having to patch the SGR each year.

American Medical Association (AMA) President Robert Wah pointed out last month, this tab for the repeal is not much higher than the cumulative cost of previous SGR patches. “Congress has spent a staggering $170 billion on 17 patches in a 12-year period, the cost of which has far exceeded the cost of eliminating the SGR altogether,” Wah wrote in his AMA blog last month. “This continuous cycle of putting a Band-Aid on the real problem creates an unpredictable environment that makes it difficult for physicians to budget and plan for practice innovations that could improve quality and reduce costs.”

NEXT: How to repeal the SGR and how to pay for it

In place since 1997, the SGR set a formula that tied Medicare reimbursements to economic growth. But when healthcare spending began to rise faster than the economy, the federal government began “patching” physician payments rather than reducing them as called for under the SGR. The practice has become an annual ritual, with 17 “patches” over the last 14 years.

Previous attempts to repeal the SGR have been opposed, mainly by fiscal conservatives who don’t want the repeal to add to the deficit. But it seems impossible to fix the SGR-and pay for it-without angering someone.

About half of the $70 billion cost of the repeal not paid for by taxpayers would come at the expense of healthcare providers, through cuts spread over a period of time. The other half would come from Medicare cuts, such as increased premiums for seniors in higher income brackets.

Nancy LeaMond, executive vice president of the American Association of Retired Persons (AARP) issued a letter to Congress expressing concern about asking Medicare beneficiaries to pay for $35 billion of the $70 billion that would not be covered by taxpayers. AARP argues that Medicare beneficiaries already are paying higher premiums and deductibles.

“AARP believes that before asking beneficiaries to pay more for their care, the physician community must be asked to contribute financially to the SGR fix. They will benefit greatly from this legislation and therefore should pay for part of the legislative deal,” says LeaMond. “Also, the SGR fix must include prescription drug savings to help address the increasing burden of high cost prescription drugs on Medicare beneficiaries. Savings through greater access to lower cost prescription drugs would allow you to avoid harmful cost-shifting proposals to beneficiaries, as well as mitigate potential cuts to the provider community.”

Still, physician groups view the current attempt at the “best chance in years” to repeal the SGR. The American Academy of Family Physicians (AAFP) says the reintroduction of last year’s bill will stabilize Medicare, improve care and reduce costs, and bring peace of mind to many providers. “A repeal of SGR was often discussed in the past, but the current climate represents the best and, possibly, the last opportunity for SGR repeal for the next three years,” says AAFP. “If full repeal is not achieved this time, Congress will likely enact its 18th short-term patch and physicians will endure three more years of an inequitable payment system that is mired in a fee-for-service structure and minimizes the value of primary care.”

The AMA also is hopeful regarding the latest attempt to appeal the SGR, joining with more than 750 other organizations in penning a letter to the House and Senate leadership urging more progress.

"We remain optimistic that our collective voices will make a difference and that Congress will finally act on eliminating the SGR,” said Wah. "It’s time to end this annual game of kicking the can down the road that is unfair to patients and physicians and wastes taxpayer dollars.”