Ken PerezWhat do all of the following pieces of legislation or plans have in common?

  • The Medicare Physician Payment Innovation Act of 2011
  • The Medicare Physician Payment Innovation Act of 2012
  • The Access to Physicians in Medicare Act 
  • The Medicare Physician Payment Innovation Act of 2013
  • The House Energy and Commerce and Ways and Means Committees’ April 2013 plan 

All of them seek to permanently repeal the sustainable growth rate (SGR) provision, a formulaic approach intended to restrain the growth of Medicare spending on physician services. Although the Congressional Budget Office earlier this year estimated that the cost of a permanent SGR repeal, or “doc fix,” would be $138 billion, that estimate was based on a freezing of all Medicare physician rates for 10 years, while every one of the aforementioned proposals includes variations that would likely increase the price tag of reform or at least introduce uncertainty into the fiscal impact calculation. 

In addition, each of the proposals either lacks a source of funding to cover the increased government spending that would result or proposes funding sources that have been generally deemed implausible or questionable. Regarding the latter, for example, The Access to Physicians in Medicare Act proposed a repeal of the expanded healthcare subsidies under the Patient Protection and Affordable Care Act—which is clearly not politically possible given the result of the 2012 presidential and congressional elections—and The Medicare Physician Payment Innovation Act of 2012 proposed tapping savings from the reduction in military operations in Iraq and Afghanistan. 

For hospitals, the obvious concern with SGR reform proposals has been the “robbing Peter to pay Paul” scenario, in which hospitals receive less funding from Medicare so that physicians can be paid more. This concern is not unfounded. The American Taxpayer Relief Act of 2012, passed by the House on Jan. 2, 2013, implemented a one-year, $25 billion doc fix for this year, the majority of which will be paid for by hospitals.

President Obama’s fiscal year 2014 budget proposal supports permanent repeal of the SGR, but rather than providing specific funding sources (which would undoubtedly elicit some political opposition), the administration’s budget proposal seeks to cover the cost of a permanent doc fix as part of a broad deficit-reduction plan. Health savings of $401 billion that “build on the health reform law and strengthens Medicare” are included in the plan, but more than $150 billion of the savings will come from reduced funding of healthcare providers. In the final analysis, with SGR reform, there’s no such thing as a free lunch.    


Ken Perez is senior vice president and director of Healthcare Policy, MedeAnalytics, Inc., Emeryville, Calif.

Publication Date: Thursday, April 25, 2013