Is SGR Replacement in Sight?

Posted in ACCC News, Advocacy, Healthcare Reform by ACCCBuzz on August 7, 2013

By Sydney Abbott, JD, Manager, Provider Economics and Public Policy, ACCC

Health Care ReformIt is a truth universally acknowledged that the sustainable growth rate (SGR) formula, which the Centers for Medicare & Medicaid Services (CMS) uses to determine annual physician reimbursement rates for services provided, is fundamentally flawed. Because the formula is designed to ensure that the annual increase in the expense per Medicare beneficiary does not exceed the growth in GDP, providers are facing a 25% reduction to reimbursement for 2014, unless Congress takes action.  Historically, Congress has stepped in at the last minute each year to avoid such enormous cuts.

This year, however, there are signs that the SGR may be on the way out—permanently.

In February the Congressional Budget Office (CBO), in its annual report on the federal budget and economy, drastically reduced the cost estimate to repeal the SGR formula—down from $245 billion to less than $140 billion over 10 years, a relative bargain in congressional terms. During the intervening months, Congress has been wrestling with legislation to replace the SGR formula. On July 31 the House Energy and Commerce Committee voted unanimously in favor of a bill that would do just that.

The Medicare Patient Access and Quality Improvement Act of 2013 (HR 2810), eliminates the current SGR formula and replaces it with a two-phase approach to physician reimbursement.  Phase one stabilizes reimbursement with a 0.5% update to the Medicare fee schedule conversion factor annually for five years. Starting in 2019, phase two begins with 0.5% updates to the conversion factor. In phase two, these updates could be positive or negative—depending on the ability of an individual provider or group of providers to reach pre-determined quality measures or clinical improvement activities.

While ACCC applauds the bill’s aim to replace the flawed SGR formula with stable payments and incentive updates, we are concerned that HR 2810 does not replenish the pool of available funds with savings realized annually by CMS.  HR 2810 requires CMS to identify services it overpays and reduce those payments by 1% each year from 2016 to 2018 (RVU reductions).  However, the bill contains no language calling for CMS to redirect that money back into services it designates as undervalued.  Without this direction, it could mean that the total payment pool would be smaller and planned reimbursement increases might never materialize.

HR 2810 currently awaits a full floor vote with 40 bi-partisan co-sponsors.  ACCC will continue to work with legislators to help ensure that legislation passed will appropriately reimburse physician services.  ACCC will keep members up to date on any developments.

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