House Lawmakers Unveil Funding Details for SGR Replacement Deal

The chairs of the House Energy and Commerce and Ways and Means committees on Friday released more details on funding for the $200 billion-plus deal to permanently repeal Medicare's sustainable growth rate formula, Modern Healthcare reports (Demko, Modern Healthcare, 3/20).

Background

Last week, Senate and House lawmakers introduced bipartisan, bicameral legislation (HR 1470) to permanently replace Medicare's sustainable growth rate formula. Congress in March 2014 approved a short-term delay to scheduled reductions to Medicare physician reimbursement rates called for by the SGR that expires on April 1, 2015. Physicians face about a 21% reduction in Medicare reimbursement rates unless Congress acts by then.

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; 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

The financing of the bill was not included in the measure released on Thursday (California Healthline, 3/20).

New Funding Details

According to lawmakers, about one-third of the measure's $200 billion-plus cost would be offset. The remainder would be added to the federal deficit. The cuts that make up the offsets would be split about evenly between providers and beneficiaries, according to Modern Healthcare.

The deal includes several funding mechanisms that would affect beneficiaries.

It would increase the share of premiums for high-income beneficiaries. For beneficiaries with incomes between $133,500 and $160,000, their share of premiums would increase from 50% to 65%. For those with incomes between $160,000 and $214,000, their share of premiums would increase from 65% to 75%.

It also would phase out Medigap plans with no Part B deductible for beneficiaries who become eligible in 2020 and beyond.

In addition, the deal includes funding provisions that would affect providers:

• Extend cuts through the disproportionate share hospital program that originally were included in the Affordable Care Act through 2025;
• Alter reimbursement rates that would reduce funding to post-acute providers, including skilled-nursing facilities and hospice providers beginning in 2018 (Modern Healthcare, 3/20);
• Allow the government to withhold 100% of providers' delinquent taxes from their Medicare reimbursements;
• Extend over six years a scheduled 3.2% increase in Medicare reimbursements to hospitals that would take effect in 2018; and
• Restrict reimbursement increases scheduled in 2018 for home health providers, hospices and nursing homes to 1%.

Other Details

Meanwhile, the measure also helps certain providers. For example, the deal would extend federal payments to hospitals in Tennessee that treat low-income individuals through 2025. Further, it would assist large-scale makers of durable medical goods and prosthetic device makers by penalizing "low-ball bidders," according to the AP/Washington Times (Fram, AP/Washington Times, 3/20).

Next Steps

The legislation is expected to be taken up this week and is expected to pass in the House, according to Modern Healthcare (Modern Healthcare, 3/2). Its "fate is less clear" in the Senate, according to the AP/Times. Senate Democrats have called for the measure to extend CHIP funding for four years, instead of the two it currently would. Further, they "dislike" the additional cost-sharing for higher-income beneficiaries and language in the measure intended to restrict abortions at community health centers (AP/Washington Times, 3/20).

Deal Draws Allies, Detractors

The bipartisan deal already has won some "powerful allies," according to AP/Modern Healthcare.

For example, Families USA on Friday publicly supported the measure, saying its extension of Children's Health Insurance Program funding will help eight million children maintain access to care. Families USA Executive Director Ron Pollack said, "Keeping the program's funding extension is essential so we don't move backwards."

In addition, American Medical Association President Robert Wah voiced support, saying it was time for lawmakers "to seize the moment and finally put in place reforms" that eliminate the annual calls for physician reimbursement cuts.

However, the deal also has elicited "powerful foes," according to AP/Modern Healthcare.

For example, AARP said the measure "is not a balanced deal for older Americans," noting the higher premiums for higher-income beneficiaries.

In addition, the Club for Growth asked lawmakers to resist the measure because it "falls woefully short" of being fully financed (AP/Modern Healthcare, 3/21).