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SGR replacement bill moves to full House committee

July 26, 2013

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The House Energy and Commerce Health Subcommittee July 23 approved by voice vote bipartisan legislation to repeal Medicare’s so-called sustainable growth rate (SGR) and replace it with an alternative system based on quality of care that would be phased in over five years. A full committee vote could come next week.

The draft legislation does not include the financial offsets needed to pay for the permanent replacement of the SGR. The Congressional Budget Office estimates that will cost about $139 billion over 10 years.

The legislation would replace the SGR with an annual update of 0.5%. Beginning in 2019, physicians practicing in fee for service also would receive a 1% bonus or payment reduction based on performance on quality measures and clinical practice improvement.

Those who fail to report quality information would continue to receive a payment reduction under the Physician Quality Reporting Program.

The legislation also directs Medicare to identify improperly valued services under the physi­cian fee schedule, which would result in a net reduction of 1% of the projected amount of expenditures during 2016 through 2018. Among other changes, the legislation would pay for care coordination services by certain qualified physicians and create a new avenue for developing and testing alternative payment models.

Overhauling Medicare’s SGR formula has been a long-standing priority for Congress. Flaws in the SGR, enacted as part of the 1997 “Balanced Budget Act,” have led Congress through the years to adopt a series of short-term patches so it could avoid cutting physicians’ payments.

Congress in January cut hospitals’ Medicare funding to help pay for a 12-month extension of the socalled "doc fix" through the end of this year. This time around, physicians face a nearly 25% cut in payments in 2014 unless lawmakers act before the end of the year. The AHA supports lawmakers’ efforts to improve the physician payment formula, but not by cutting hospital payments and jeopardizing patients’ access to care.

Through a series of complicated calculations, the SGR formula in effect means that if spending due to increased use of services by Medicare patients rises faster than the nation’s gross domestic product (GDP), Medicare must compensate by cutting reimbursement rates for physicians enough to bring spending back in line with GDP growth.

"The time of temporary fixes and kicking the can down the road has ended,” health subcommittee Chairman Joe Pitts, R-PA, said in a statement. “I’m heartened that this framework has overwhelming bipartisan support,” added subcommittee member Michael Burgess, R-TX, who played a major role in drafting the legislation.

For more on the bill, click on: http://tinyurl.com/k4wvgav.