House, Senate Leaders Unveil SGR Replacement Legislation

On Thursday, Senate and House lawmakers introduced bipartisan, bicameral legislation (HR 1470) to permanently replace Medicare's sustainable growth rate formula, Modern Healthcare reports.

Background

According to Modern Healthcare, the SGR replacement measure is largely the same as legislation (HR 4015, S 2000) introduced last year to replace the SGR (Modern Healthcare, 3/19).

While there was bipartisan, bicameral agreement on the legislation last year, both chambers of Congress failed to pass a permanent SGR replacement after lawmakers reached an impasse over how to pay for the legislation. Congress in March 2014 then approved a short-term delay to scheduled reductions to Medicare physician reimbursement rates called for by the SGR. Physicians face about a 21% reduction in Medicare reimbursement rates unless Congress acts by April 1 (California Healthline, 3/12).

Funding Agreement Largely in Place

House Speaker John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-Calif.) have now largely agreed to a $213 billion deal to fund the permanent SGR replacement, along with a two-year extension of Children's Health Insurance Program funding.

The deal would offset about $70 billion of the projected costs. Roughly half of the possible deal's offsets would come from cuts to hospitals, insurers and acute-care providers. The other half of offsets would come from cuts to Medicare beneficiaries, such as additional means testing for high-income beneficiaries.

Overall, the deal would be expected to add about $140 billion to the federal deficit over 10 years. According to congressional staffers, the agreement to finance the bill is still subject to change (Demko, Modern Healthcare, 3/19).

The financing of the bill was not included in the measure released on Thursday, the Wall Street Journal reports. Bill co-sponsor Rep. Michael Burgess (R-Texas) said that language to offset the bill's projected costs would be unveiled next week.

The entire package is then expected to be voted on next week.

Legislation Details

Among other provisions, the SGR replacement legislation would:

• Provide a 0.5% annual raise through 2019 for providers who participate in Medicare before transitioning to an incentive-based payment system;
• Encourage providers to participate in alternative payment models focused on patient outcomes, with providers participating qualifying models receiving a 1% annual rate increase beginning in 2026 (Hughes, Wall Street Journal, 3/19); and
• Provide $7 billion in funding over two years for community health centers, maintaining the current funding for community health centers that is set to expire on Oct. 1 (Fram, AP/San Francisco Chronicle, 3/19).

Potential Obstacle: Length of CHIP Funding Extension

According to the Journal, early indications are that the proposal is securing broad bipartisan support. However, several potential obstacles remain (Wall Street Journal, 3/19).

Some Senate Democrats have threatened to vote against the bill unless it extends CHIP funding for at least four years, rather than the two-year funding extension currently included in the measure, Modern Healthcare reports (Modern Healthcare, 3/19).

While the Affordable Care Act reauthorized CHIP through 2019, federal funding for the program is set to expire on Sept. 30, 2015. A House GOP staffer explained the GOP's preference for a two-year CHIP funding extension, saying, "Republicans would like to reform and improve this program, and the next opportunity will be in two years when we have a new president" (Scott, National Journal, 3/19).

However, Sen. Sherrod Brown (D-Ohio) said the Senate Democrats would "insist" that an SGR replacement measure include a four-year CHIP funding extension (Attias, CQ Roll Call, 3/19). He said, "It's a question of: Do we take care of the doctors permanently and the children for two years? I think Speaker Boehner's going to know that 46 Senate Democrats want to see four years, and they're going to insist on that."

Senate Minority Leader Harry Reid (D-Nev.) is also pushing for a four-year CHIP funding extension (National Journal, 3/19). He said the SGR replacement agreement "stinks," according to CQ Roll Call (CQ Roll Call, 3/19).

In addition, Sen. Ron Wyden (D-Ore.) is withholding his support of the SGR replacement bill. In a statement, he said, "At this point, it is not clear what our House colleagues will ask America's seniors and providers to pay, and the impact that new financial demands will have on them both." He added, "Every Democrat in the Senate has co-sponsored a clean, four-year extension of CHIP ... Yet negotiators in the House seem willing to settle for less, even though extending funding for this widely popular program would amount to pennies on the dollar in terms of the total cost of the House package" (Modern Healthcare, 3/19).

Meanwhile, the not-for-profit advocacy group First Focus on Thursday sent a letter to Senate and House lawmakers urging them to support a four-year extension of CHIP funding (National Journal, 3/19).

First Focus President Bruce Lesley wrote that his group does "not support CHIP being 'SGR'd' in a package where Congress is fixing that very problem in Medicare with a long-term or permanent fix." He added that the current proposal could put a "CHIP funding cliff" in place of a "SGR funding cliff" (Ferris [1], The Hill, 3/19).

Potential Obstacle: Abortion Language

In addition, the SGR replacement deal could also face opposition from Senate Democrats who have stated concerns about language they say would codify abortion restrictions, the AP/Chronicle reports.

Specifically, Reid and others have said that the SGR replacement agreement as currently crafted would codify Hyde Amendment restrictions on funding for abortions at community health centers.

The Hyde Amendment, which has been renewed by Congress annually for many years, prohibits the use of federal funds for abortions, except in cases of rape or incest or to save a woman's life. President Obama in a 2010 executive order said that the amendment, along with other regulations, bars community health centers "from using federal funds to provide abortion services" except in the exempted cases.

Adam Jentleson, a spokesperson for Reid, said that the senator "sees this codification of the Hyde amendment as part of a systematic effort by Republicans to expand its scope." Jentleson said that Reid would wait to for the House to approve an SGR replacement agreement before deciding if he would support such a measure.

However, Pelosi spokesperson Drew Hammill said that the SGR replacement's language "represents no change in current policy for health centers, and would have no operational impact at the health center level." He said, "In contrast to the effort by Republicans on the Senate trafficking bill, this is not a codification of Hyde because the language expires when the funds do," in two years (AP/San Francisco Chronicle, 3/19).

Potential Obstacle: Adding to Deficit

Meanwhile, some conservatives have expressed objections to the SGR replacement deal over how much it would add to the deficit, according to Modern Healthcare (Modern Healthcare, 3/19).

The concerns, expressed by Heritage Action and others, come as a Committee for a Responsible Federal Budget report found that the proposal would increase the deficit by $400 billion by 2035. The researchers wrote, "While it is true that the savings will be greater in the second decade, costs will grow as well. Under the current framework, costs will most likely remain higher than savings in the second decade as well as the first."

However, although some Republicans have said they will wait to weigh in on the proposal until they have seen the specific financing details, the SGR replacement plan overall has not received much opposition from GOP fiscal conservatives, according to The Hill (Ferris [2], The Hill, 3/19). The Congressional Budget Office has not yet issued a cost estimate on the measure (Wall Street Journal, 3/19).