Congress Poised to Permanently Repeal the Medicare SGR

Congress is currently moving a permanent repeal of the Sustainable Growth Rate Formula or “SGR” that dictates payment under the Medicare Physician Fee Schedule in Medicare Part B.  The  SGR was put into effect in the Balance Budget Act of 1997 as a way to determine appropriate physician payments automatically each year.  For the first few years it generated positive updates, but since 2001 the SGR has generated negative updates - or reimbursement cuts - that would go unto effect unless Congress intervened.  And Congress has intervened to avert the cuts each year - sometimes multiple times each year - by legislating short-term patches to cover and increase in reimbursement.  Each time that happened, Congress had to scramble to find billions in offsets (aka cuts to other programs) mostly in Medicare, but sometimes in other health care or government spending.  And the nature of the SGR, which remained in force in statute, was that after each patch, a larger cut was generated than the previous.  So over time, the cuts have gotten bigger and bigger, more expensive to avert, and more complex to tackle.  On April 1, 2015 Medicare reimbursement tied to the physician fee schedule will be cut by 21 percent without Congressional intervention.

Concepts to permanently repeal the SGR have been floated in the past but such legislation is so expensive that it has been challenging to consider accumulating nearly $200 billion in offsets that have sometimes been considered required.  However, this month, in a record demonstration of bipartisanship to solve a challenging issue, Speaker Boehner and Leader Pelosi have worked out a deal to permanently repeal the SGR by agreeing to NOT pay for the majority of the cost with offsets to other areas of the Medicare program or government spending.  There are some offsets included that would affect hospitals and post-acute care as well as institute additional means testing for new Medicare beneficiaries and enact reforms to MediGap.

On March 26, 2015, the legislation to repeal the SHR passed the House by an overwhelming vote of 392-37.  The President has indicated he will sign the bill if it reaches his desk.  All that remains is for the Senate to determine if it can pass the bill through its chamber.  If the legislation is signed into law,  any providers that receive payment under Medicare Part B will not face a 21 percent cut in 2015 - or ever again under the SGR.

Going forward, most in health care policy would welcome a world without the SGR , which created a crisis every year in Congress that had to be fixed.  It required time and attention of lawmakers and billions in funding.  Eliminating that crisis now and into the future should allow those in Congress that are focused on healthcare to return to regular order of authorization and appropriation legislation.  Over time, we may see more time and space for Congress to consider and pass healthcare legislation.  This will present risks - legislation we do not favor - as well as opportunities.  But those that are focused on healthcare in DC would generally favor for a world without an annual SGR crisis to solve so that we can gain attention on other important issues of importance important to PRA and our members.