GOP Nears Budget Deal That Could Offset Costs of SGR Replacement

Negotiators in the House and Senate are nearing a budget agreement that likely will include funding for a new law (HR 2) that permanently replaces Medicare's sustainable growth rate formula, Politico reports (Bade, Politico, 4/22).

HR 2 Details

The measure will provide a 0.5% annual payment increase through 2019 for providers who participate in Medicare and then transition to an incentive-based payment system designed to encourage participation in alternative payment models. The law includes several other measures related to health spending, such as funding for community health centers, which serve low-income individuals in every state. In addition, the law includes a two-year extension of funding for the Children's Health Insurance Program. Further, the law bill delays fully enforcing CMS' "two-midnight" rule for two months.

Overall, the SGR replacement measure is projected to cost about $213 billion over 10 years. It will offset about $70 billion of the projected costs and add about $140 billion to the federal deficit over 10 years, according to estimates. The offsets include almost $35 billion in increased Medicare premiums for higher-income beneficiaries, which are not scheduled to take effect until 2018. In addition, the law includes payments cuts to home health agencies, hospitals and nursing homes (California Healthline, 4/17).

Budget Background

Meanwhile, the Senate last month voted 52-46 to approve Republicans' fiscal year 2016 budget proposal, which includes changes to federal health programs and a provision to repeal the Affordable Care Act.

The proposal calls for more than $400 billion in Medicare savings over 10 years but does not provide many specifics on how those savings would be achieved. The plan also calls for states to have more flexibility in running Medicaid programs and seeks about $400 billion in Medicaid savings over a decade (California Healthline, 3/27).

The House last month also approved a Republican budget plan that seeks deficit reduction in part through revisions to federal health spending and repealing the ACA.

Under the House plan, Medicare would transition to a "premium support" model for future beneficiaries. Medicare would provide funds for beneficiaries who join the program after 2023 to purchase private coverage. The plan also calls for the federal government to give states a lump sum to run their individual Medicaid programs (California Healthline, 3/26).

Sens. Seek SGR Replacement Funds in Final Budget Proposal

According to Politico, Republican Sens. Mike Crapo (Idaho) and Jeff Sessions (Ala.) are hoping to include offsets for the entire cost of HR 2 in the final budget proposal.

Crapo has said he is working to pressure other budget negotiators to cut about $140 billion from the budget over the next decade to pay for the remaining costs of HR 2. He noted that around $14 billion of those cuts would need to take effect next year. Crapo said, "I suspect there's broad support for it."

According to Politico, conservatives in Congress have faced a backlash for passing the SGR replacement measure without specifying ways to fully fund it (Bade, Politico, 4/21).

Politico reports that Senate Budget Committee Chair Mike Enzi (R-Wyo.) has said the final budget agreement likely will offset the costs of HR 2 beginning next year.

Agreement Unclear on ACA Repeal

Meanwhile, details are still vague about other health care issues within a final budget agreement, such as Republicans' strategies for dismantling the ACA (Politico, 4/22).

GOP lawmakers are split over whether to use budget reconciliation to repeal the ACA. Some GOP lawmakers say using the technique, which ultimately would be vetoed by President Obama, would be a waste of an opportunity to achieve other budget priorities. However, other Republican lawmakers say not using reconciliation to repeal the ACA goes against campaign promises (Peterson, Wall Street Journal, 4/19).