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Congress Close to Deal on SGR Repeal and Medicare Provider Payment Modernization Act

Feb 09, 2014

On February 7, members of Congress unveiled a bicameral, bipartisan agreement, The SGR Repeal and Medicare Provider Payment Modernization Act, to repeal Medicare's physician payment formula (SGR) and replace it with a system that would provide stable payment updates for five years and shift Medicare to a system based on value versus volume of care. The deal is the product of narrowing differences in three congressional committee proposals—Senate Finance, House Ways and Means and House Energy and Commerce.

The legislation would permanently repeal the SGR and provide an annual update of 0.5% from 2014 through 2018. The 2018 payment rates would be maintained through 2023 so physicians have time to receive additional payments through a merit-based incentive payment system.

Still to come are details on how lawmakers will address healthcare extenders, such as the ambulance add-on payments , as they are not currently included in the legislation and how they would cover the agreement's cost to repeal and replace the SGR, which is rumored to be about $126 billion over 10 years. Extenders could always be included by the Rules committee late in the process but at the moment Hill staff remains tight lipped about if and how they will address extenders.

It appears that a number of provisions are being considered as potential sources to offset the ten-year cost. Among the 65 potential 10-year-offsets taken from documents released by the Congressional Budget Office (CBO) and the Office of Management and Budget (OMB) are provisions: limiting the tax exclusion for employer-sponsored health insurance (raising $262 billion in revenue over 10 years); requiring pharmaceutical manufacturers to pay a minimum rebate on drugs covered under Medicare Part D for low-income beneficiaries (saving about $123 billion over 10 years); increasing premiums for Medicare Parts A, B and D (saving about $287 billion); reducing PPACA subsidies for higher income individuals (saving about $109 billion); and adjusting payment updates for certain post-acute care providers (saving about $79 billion).

If an agreement on extenders and cost offsets cannot be reached in early March, it is likely that Congress will again have to extend the March 31 date after which severe Medicare physician payment cuts would have to be made under current law. There has been a lot of discussion around a 9-month or 21-month "patch" should an agreement not come to fruition.

We will keep you posted as more details emerge.