Sept. 13—Bipartisan legislation to replace Medicare’s physician payment formula would cost $176 billion over 10 years, the Congressional Budget Office (CBO) estimated Friday.

The legislation would replace Medicare’s sustainable growth rate (SGR) formula—established in 1997 to control the growth of spending in the program—by phasing in replacement payment systems over several years.

Additionally, the legislation would provide annual 0.5 percent Medicare physician fee increases from 2014 through 2018. In 2019, physicians could choose to receive Medicare physician payments based either on a physician’s performance in the Quality Update Incentive Program (QUIP), or through an Alternative Payment Model.

Other provisions included in the bill would adjust relative value units for certain physician services and require the development of payment codes to encourage care coordination and the use of medical homes.

The specific approach to SGR repeal used in the Medicare Patient Access and Quality Improvement Act was more costly than a May CBO estimate that a 10-year repeal of the SGR that froze phsyicians' rates at current levels would cost $139.1 billion. The earlier CBO estimate did not include additional measures that were part of the bill, such as the small annual rate increases.

The higher estimate for the bill could create problems for its passage.

“Anything that makes the bill more expensive—and therefore more difficult to pay for—will make it harder to pass,” said Chad Mulvany, director, healthcare finance policy, strategy, and development at HFMA.

The cost of repeal has always been the biggest obstacle to it advancing in Congress, even as legislators broadly condemn the SGR. Politicians on both sides of the aisle bemoaned the disruptive effects of a series of series of last-minutes “patches” Congress has passed to delay SGR-mandate cuts with temporary offsetting cuts.

The Medicare Patient Access and Quality Improvement Act, which has 40 bipartisan cosponsors, does not include a way to pay for scraping the SGR. The senior Republicans who sponsored the bill said they would propose a funding mechanism this fall.

The Senate Finance Committee is developing separate SGR repeal legislation but has not yet introduced it.

The cost of a permanent fix has grown nearly every year, due to a widening gap between actual physician pay rates and rates required by the SGR formula.

Physicians face another scheduled SGR-related 24.4 percent cut at the end of this year, unless the formula is scrapped or Congress again delays the cut. 

Publication Date: Friday, September 13, 2013