SGR Repeal Requires Cuts Or Reforms To Proceed
By Christine Kern, contributing writer
Despite accolades, SGR repeal still must find cuts or payment reforms to move forward
Physician groups are hailing the Sustainable Growth Rate (SGR) Repeal and Medicare Provider Payment Modernization Act which would eliminate Medicare's sustainable growth-rate formula mandating an automatic 24 percent across-the-board cut in physician pay beginning March 31. The question now is how to pay the $126 billion price tag.
Hospitals remain vehemently opposed to deeper Medicare cuts to fund the new bipartisan legislation that would permanently end cycle of patchwork fixes. Congress may have to enact some form of payment or tax reform if it expects to get the job done this year.
According to Modern Healthcare, the 1997 Balanced Budget Act instituted the SGR, linking physician fees to growth in the U.S. gross domestic product. It included a “clawback” mechanism for rolling back fees if spending exceeded the previous year's budget targets. In 2003, Congress began enacting a cycle of legislative “patches.” These patches temporarily prevented cuts from taking place, but resulted in the threat of deeper cuts each subsequent year, thus requiring more expensive patches each time.
According to the American Medical Association, the mounting patches have cost taxpayers $153.7 billion (PDF) over the past decade.
Finding an acceptable solution to the SGR budget issues is not simple. Bipartisan legislation has been introduced by Senator Ron Wyden (D-OR) that aims to lower costs by better coordinating the care for the sickest 5 percent of Medicare beneficiaries, claiming it could save up to $25 billion a year. This would probably more than pay for a permanent fix, although the savings from the Better Care, Lower Cost Act have not be calculated or verified by Congressional Budget Office.
A number of other solutions were offered in a Congressional Budget Office report released last November. It noted that the tax exclusion of employer-provided healthcare benefits cost the federal treasury $250 billion in 2013. There's remote possibility that reducing that slightly to pay for a doc-fix could gain support, in light of the recent Republican healthcare reform alternative proposed limiting the tax exclusion to pay for tax credits for the uninsured.
Responding to the proposal to raise the Medicare eligibility age, Dr. Robert Berenson, senior fellow at the Urban Institute, stated that major policy shifts or payment restructuring could be possible as part of an overall Medicare reform package, but not as a one-item budgetary measure. “No one is going to raise the eligibility age to pay for an SGR fix,” he said.
And hospitals and health-care providers are not willing to make cuts to save the doctors’ fees. Brian Ahier, president of Advanced Health Information Exchange Resources, pointed out that the hospital sector is already rebelling against paying the bill for the SGR repeal, and expects the pharmaceutical industry to do the same.
Ahier concluded, “There could also be proposals for offsets in the pharmaceutical industry such as changes to the Medicare Part D rebate program and perhaps reducing the market exclusivity period for biologics—but the pharmaceutical industry would lobby hard against that. No matter what the proposal, there will be opposition, and this being an election year, I expect campaign coffers from all sides will benefit from the debate.”
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