In Charles M. Schulz’s illustrious “Peanuts” comic strip, Lucy van Pelt famously says to Charlie Brown, “I’ll hold the football, and you come running up and kick it.” 


Because he’s been fooled many times before, Charlie Brown bellows, “How long, O Lord?” Nevertheless, Charlie Brown takes several steps back and runs up to kick the ball—but just as his foot is about to strike it, Lucy pulls the ball away, and Charlie Brown falls flat on his back, screaming, “Aughh!” 

Lucy then answers Charlie Brown’s question: “How long? All your life, Charlie Brown. All your life.” 

Those of us hoping for a permanent repeal of the sustainable growth rate (SGR), a formulaic approach intended to restrain the growth of Medicare spending on physician services, may feel somewhat like Charlie Brown nowadays, as hopes for a long-term fix—fueled by bipartisan and bicameral support of SGR reform proposals that emerged at the end of 2013—would appear to have succumbed, yet again, to fiscal and political realities. 

There’s no question that a permanent fix of the SGR is badly—almost universally—desired. The SGR has been unpopular and often pilloried by both sides of the aisle in Congress, described as “terrible,” “much hated,” and “despised.” As the staff of POLITICO Pro’s “Afternoon PULSE” quipped, “If we were released from our professional obligation to be neutral observers and were granted three health policy wishes, No. 1 would be for Congress to permanently fix SGR, No. 2 would be for Congress to permanently fix SGR, and number three would be for Congress to permanently fix SGR.”a

On March 27, 2014, the House, under a suspension of normal rules, approved via a voice vote H.R. 4302, the Protecting Access to Medicare Act of 2014, a patch to the SGR that would avoid a 24.4 percent reduction to Medicare’s physician fee schedule slated to take effect April 1, 2014—replacing it with a 0.5 percent increase to the physician fee schedule thru Dec. 31, 2014, and a 0 percent increase for Jan. 1, 2015, thru March 31, 2015. 

Then, on March 31, 2014, the Senate approved H.R. 4302 on a bipartisan 64-35 vote. The one-year patch is estimated to cost about $20 billion, and President Barack Obama is expected to sign the bill into law. Thus ended the latest chapter of “As the SGR Turns.” 

Fiscal Realities 

Since 2012, the Congressional Budget Office (CBO) has released 13 estimates of the 10-year cost of SGR fixes, usually assuming a freeze in rates (i.e., 0 percent annual updates to the physician fee schedule). These cost estimates have ranged from a low of $116.5 billion to a high of $376.6 billion. 

At the end of February 2014, the CBO estimated that H.R. 4015, the SGR Repeal and Medicare Provider Payment Modernization Act of 2014, would cost $138.4 billion from 2014 through 2024. H.R. 4015 was introduced in January by Rep. Michael C. Burgess (R-Texas), who is a physician.

In mid-March 2014, Senate finance committee chairman Ron Wyden (D-Ore.) introduced S. 2110, the Medicare SGR Repeal and Beneficiary Access Improvement Act of 2014, the 10-year cost of which the CBO estimated to be $180.3 billion. 

On March 25, 2014, a similar bill—S. 2157, the Commonsense Medicare SGR Repeal and Beneficiary Access Improvement Act of 2014—was introduced in the Senate by Sen. Wyden. 

Unfortunately, to date, all the attempts to permanently repeal the SGR have either not specified any specific sources of funding—so-called “pay-fors” that would offset the increased government spending resulting from repeal of the SGR, thereby allowing the reform legislation to be deficit-neutral—or proposed sources that the majority of Democrats or Republicans in Congress would not be willing to even consider.

Political Realities

The “third rail” in politics is a metaphor for any issue so controversial that it is considered “charged” and “untouchable.” The third rail of American politics is often said to be cutting Social Security, the nation’s largest entitlement program. 

With regard to permanent SGR reform pay-fors, some additional third rails have emerged. 

For Democrats, the Affordable Care Act’s individual mandate—widely viewed as the centerpiece of President Barack Obama’s healthcare reform law—appears to be a third rail. On March 14, 2014, an amended version of H.R. 4015, authored by Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, was approved by the House, 238-181, but because the bill sought to pay for a permanent SGR fix by delaying the healthcare reform law’s individual mandate, it was deemed dead on arrival in the Democratic-controlled Senate.

In like manner, for Republicans, the idea that there are funds available from lower-than-projected future spending on Overseas Contingency Operations (OCO)—military operations in Iraq and Afghanistan—is a kind of third rail. In 2012, Rep. Allyson Schwartz (D-Pa.) introduced to the House the Medicare Physician Payment Innovation Act of 2012 (H.R. 5707), which sought to use OCO savings to fund a permanent SGR reform. But a letter from Sen. Tom Coburn (R-Md.) and Sen. Joe Lieberman (I-Conn.) dismissed this idea, stating, “The funds allocated for OCO or ‘war savings’ are not real, and every member of Congress knows this.”b

Nevertheless, in March 2014, Wyden and Sen. Harry Reid (D-Nev.) resurfaced and promoted the idea of using OCO savings to fund a permanent SGR fix, with S. 2157 proposing to limit discretionary appropriations for OCO for 2016-21 to a total of $404 billion. The proposal was projected to save $197.1 billion, more than enough the cover the bill’s estimated $180.3 billion cost.c That said, an aide to Reid admitted, “It’s very clear that Republicans simply will not support it.”

March 31, 2014—the last day before the aforementioned 24.4 percent reduction to the physician fee schedule was to take effect—threw into sharp relief both third rails. In a last-ditch effort to get a permanent SGR fix passed, Wyden asked the Senate for unanimous consent to move S. 2157. Immediately, Sen. Jeff Sessions (R-Ala.), the ranking Republican on the Senate budget committee, rose to object to Wyden’s request, killing the motion. “Budget experts tell us that paying for this through OCO is a mother of gimmicks,” Sessions said. He countered with a similar motion for the Senate to pass a Republican alternative, the amended version of H.R. 4015, that would fund the SGR fix by repealing the ACA’s individual mandate. Wyden immediately shot down the proposal.e

Kicking the Can Way Down the Road

Although Speaker of the House John Boehner (R-Ohio) and Reid both say they will still work toward a permanent SGR repeal, the 12-month duration of the new law implicitly acknowledges how unlikely it is that the two political parties will come together to pass another doc fix of any sort during the midterm election campaign season this fall. 

It’s hard to imagine, but the next Congress is likely to be even more ideologically riven, as the Republicans have signaled that they will make Obamacare the central issue in the upcoming elections, while President Obama and his party seek to defend the cornerstone of his legislative legacy. 

Given these fiscal and political realities, it is even harder to imagine Congress passing a broad deficit-reduction plan that incorporates numerous new healthcare reform components that would together fund a permanent doc fix. Thus, this most recent SGR patch might constitute a kicking of the can way down the road, with passage of another one-year or possibly two-year fix in 2015. Permanent SGR reform would then be on the horizon in early 2017, after the 2016 elections. These elections may result in changes in the White House and Congress that we can only hope will create an environment more conducive to constructive compromise.  

Ken Perez is vice president of healthcare policy, Omnicell, Inc., Mountain View, Calif., and a member of HFMA’s Northern California Chapter.


a. Kenen, J., “6 Million and Counting,” “Afternoon PULSE,” POLITICO Pro, March 27, 2014.

b. Coburn, T., and Lieberman, J., letter to Sen. Harry Reid and Sen. Mitch McConnell, Feb. 2, 2012.

c. “CBO Cost Estimate of S. 2157, the Commonsense Medicare SGR Repeal and Beneficiary Access Improvement Act of 2014, as Introduced on March 25, 2014,” Congressional Budget Office, March 31, 2014. 

d. Haberkorn, J., “House ‘Doc Fix’ Vote in Doubt,” POLITICO Pro, March 27, 2014. 

e. Frank, J. N., “BREAKING: Late Effort to Advance Permanent SGR Fix Fails in Senate,” Modern Healthcare, March 31, 2014.

Publication Date: Thursday, May 01, 2014

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