Oct. 31—A bipartisan, bicameral proposal to replace Medicare’s physician payment system was introduced Thursday—but chances for enactment into law were limited by the proposal’s lack of ways to cover its costs.

The measure, offered by the Republican and Democratic leaders of the House and Senate committees with primary jurisdiction over Medicare, would replace Medicare’s sustainable growth rate (SGR) formula. The new model would freeze current payment levels for 10 years and allow physicians and other providers to earn performance-based incentive payments through a compulsory budget-neutral program.   

That SGR formula, which was established in 1997, aimed to control the rise in the program’s physician spending. But the cuts it required were repeatedly delayed by temporary, last-minute congressional action over the past decade. Meanwhile, the size of the required cuts continued to grow, and now, the formula calls for a 24.4 percent reduction in physician payments at the end of this year.

“This discussion draft is an important step in a long-term solution to this failed policy,” Rep. Dave Camp (R-Mich.), chairman of the House Ways & Means Committee, said in a release. “Creating a policy that rewards providers for delivering high quality, efficient health care is the ultimate goal, and this draft brings us one step closer to that reality.”

The proposal also would combine existing physician quality incentive programs into one comprehensive program. Additionally, it would exempt from the incentive program any physician who receives a “significant portion” of their revenue from an alternative payment model that involves two-sided financial risk and a quality measurement component. Instead, such physicians would receive bonus payments beginning in 2016. 

A potentially fatal shortcoming of the SGR proposal is its lack of a funding mechanism to cover the cost of eliminating the SGR, which is estimated to cost $139 billion over 10 years, according to the Congressional Budget Office.

The committees are soliciting comments on the proposal through Nov. 12 and a formal bill could follow.

Publication Date: Thursday, October 31, 2013