Senate Passes Bill To Permanently Replace Medicare’s SGR Formula

On Tuesday, the Senate voted 92-8 to approve legislation (HR 2) that would permanently replace Medicare's sustainable growth rate formula, the New York Times reports (Pear, New York Times, 4/14).

Background

The House last month voted 392-37 to approve the bill. The measure calls for providing a 0.5% annual payment increase through 2019 for providers who participate in Medicare and then transitioning to an incentive-based payment system designed to encourage participation in alternative payment models. The bill includes several other measures related to health spending, such as funding for community health centers, which serve low-income individuals in every state (California Healthline, 4/13). In addition, the bill includes a two-year extension of funding for the Children's Health Insurance Program (New York Times, 4/14). Further, the bill would delay fully enforcing CMS' so-called "two-midnight" rule for two months (Demko, Modern Healthcare, 4/14).

Overall, the SGR replacement measure would cost about $213 billion over 10 years. It would offset about $70 billion of the projected costs and add about $140 billion to the federal deficit over 10 years, according to estimates (California Healthline, 4/14). The offsets include almost $35 billion in increased Medicare premiums for higher-income beneficiaries (New York Times, 4/14). The premium increases would not take effect until 2018 (Hughes, Wall Street Journal, 4/14). In addition, the bill includes payments cuts to home health agencies, hospitals and nursing homes (New York Times, 4/14).

Amendments Rejected

Senate lawmakers considered and rejected six amendments that would have:

• Changed the bill's CHIP funding extension from two years to four years;
• Directed more funding to women's health care and eliminated abortion funding restrictions included in the measure;
• Repealed a cap on Medicare physical therapy services (Debonis, "Post Politics," Washington Post, 4/14);
• Changed how Medicare incentivizes health care quality (Haberkorn, Politico, 4/14);
• Repealed the Affordable Care Act's individual mandate; and
• Required the measure to be fully funded (New York Times, 4/14).

Reaction

Senate Majority Leader Mitch McConnell (R-Ky.) said, "Instead of kicking this important Medicare payment issue down the road again, a strong bipartisan majority in Congress voted to finally solve the problem and ensure that seniors on Medicare don't lose access to their doctors."

Meanwhile, Sen. Mike Lee (R-Utah) criticized Republicans who voted for the measure because it is not fully funded, which he said goes against the party's goal of balancing the federal budget ("Post Politics," Washington Post, 4/14).

Federal officials praised the vote. However, CMS Chief Actuary Paul Spitalnic noted that the measure could lead to payments cuts "for most physicians" after 2025. He said, "If not addressed by subsequent legislation, we expect that access to and quality of physicians' services would deteriorate over time for beneficiaries" (New York Times, 4/14).

Advocacy groups that have long lobbied for an SGR replacement applauded Congress for passing the measure. David Fleming, president of the American College of Physicians, called the vote "historic," adding, "Physicians and their patients no longer will have to be concerned with impending yearly payment cuts ... and no longer will this burden of uncertainty be hanging over physician practices" (Levey, Los Angeles Times, 4/14).

Next Steps

The bill now heads to President Obama for his consideration (New York Times, 4/14). Obama has indicated he will sign the measure, calling it "a milestone for physicians, and for the seniors and people with disabilities who rely on Medicare for their health care needs" (Los Angeles Times, 4/14).