Dec. 13—Similar bills to replace Medicare’s physician payment formula passed House and Senate committees Thursday, but final passage is not expected until early 2014.

The versions of a bipartisan framework that would authorize a new payment system linking pay increases to quality care improvements were approved 39-0 by the House Ways and Means Committee and by voice vote by the Senate Finance Committee.

Under the proposed legislation, physicians who opt not to participate in the new pay-for-performance arrangements would have their rates frozen for 10 years.

The legislation would replace the sustainable growth rate formula (SGR), which was enacted in the Budget Control Act of 1996 to control the growth of Medicare spending. However, the deep cuts in physician rates that the formula required has led Congress to pass a decade of funding measures—worth $150 billion—to delay those cuts in order to preserve seniors’ access to care.

“After a decade of Band-Aid solutions, it is time for us to act,” said Sen. Max Baucus (D-Mont.). “I am proud to say that today we have taken an important step toward that goal.”

Committee approval of the legislation drew cautiously optimistic assessments from providers who have long urged replacement of the SGR.
“Committee approval of these bills is a positive sign,” said Rick Gundling, vice president of healthcare financial practices at HFMA. “However, the biggest obstacle remains finding a ‘pay for’ everyone can agree on.”

The legislative movement followed soon after the Congressional Budget Office (CBO) revised downward the projected 10-year cost of repealing the SGR from $139 billion to $116.5 billion. Both amounts are less than the August 2012 estimate of $271 billion.

Hospital advocates remain concerned that a final payment mechanism may try to offset the bill’s cost with cuts to those facilities—as previously proposed. No mechanism to cover the cost of the SGR repeal was included in either bill.

In addition to repealing the SGR, the bills approved Thursday would combine Medicare’s existing quality programs—including meaningful use of electronic health records, the Physician Quality Reporting System and the value-based modifier—into one value-based performance program; incentivizes physicians to move from fee-for-service to payment models focused on coordination and prevention; and give more access to information to patients and physicians.

The Senate bill also would address a variety of “extenders,” which provide additional Medicare funding to specific categories of providers.

The bill also came as the Kaiser Family Foundation reported that despite the ongoing physician funding issue, beneficiaries generally had good access to physicians. The not-for-profit found that 96 percent of beneficiaries report having access to a doctor’s office or clinic, and about 90 percent of beneficiaries reported an ability to schedule on-time appointments for routine and specialty care.

Without congressional action, the formula would initiate a 20.1 percent cut in Medicare physician rates in January. Previously planned SGR cuts have required Congress to pass last-minute temporary patches, and similar steps were expected to avert the latest cut.

A three-month patch to delay the planned cut was included in a budget bill that Congress is expected to pass Friday will give legislators until the end of March to pass the replacement measure.

Publication Date: Friday, December 13, 2013