House Panel Approves Legislation Repealing Medicare's Physician Reimbursement System

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By Steve Teske  


By voice vote, the House Energy and Commerce Health Subcommittee July 23 approved bipartisan draft legislation (bill number not available) that would repeal the current Medicare physician payment system and replace it with one based on quality of care measures and new care models.

Subcommittee Vice Chairman Michael C. Burgess (R-Texas) told BNA the full committee will consider the legislation July 31.

The committee has released several iterations of proposals to fix the current system, including three legislative drafts (140 HCDR, 7/22/13).

The vote was a rare show of bipartisanship in the often politically divided House. The subcommittee quickly passed the measure shortly after convening after first approving a technical amendment to the measure.

SGR Repeal

The legislation would repeal the sustainable growth rate formula in Medicare’s current system and create a fee-for-service system in which providers report quality measures. Providers also would have the ability to leave fee for service and opt for new ways of delivering care, such as medical homes.

According to the proposal, during the phase-in period, physician groups--in coordination with the Department of Health and Human Services and medical standards-setting organizations--would work on a set of quality measures that would be implemented in 2019.

Physicians would receive a 0.5 percent annual increase per year for the first five years of the new payment system. Beginning in 2019, physician Medicare payments would include adjustments up or down, depending on how well their services met the new quality guidelines.

Physicians receiving the highest quality scores would receive a 1 percent payment increase over standard Medicare rates; physicians with quality scores in the midrange would receive no increase; and physicians in the lower range would receive a 1 percent payment reduction.

Providers could also opt to participate in demonstration programs featuring alternative payment models aimed at coordinating care and improving quality of care for patients.

Funding the Bill

Although the policy in the draft has received bipartisan support, lawmakers have yet to identify ways to pay for the legislation, which could make the process of crafting a final bill more contentious.

The Congressional Budget Office has said freezing physicians’ Medicare reimbursement and preventing SGR-related cuts for 10 years would cost $139 billion.

That is about $100 billion less than previously estimated, and as a result, lawmakers and physician groups say this year provides a rare opportunity to permanently fix the system at a lower cost. Physicians’ Medicare reimbursement will be reduced about 25 percent in January 2014, unless Congress acts.

The SGR was included the Balanced Budget Act of 1997 to control Medicare spending by linking it to the nation’s economic growth rate. Since then, Medicare spending has outpaced the nation’s economic growth, causing lawmakers to pass a “doc fix” annually for the past decade to cancel resulting payment cuts. A permanent fix has eluded Congress, due to its high price tag.

Even with a lesser price tag, funding the legislation represents perhaps its greatest challenge to advancing. House Republicans have decided to first tackle the policy involved in replacing the SGR, choosing to address funding the measure later so as to not thwart momentum in crafting legislation.

House Republicans have acknowledged that funding the physician pay fix in part by taking money from the Affordable Care Act will be opposed by Democrats, as will changes to the medical malpractice system.

“We have to come up with a pay-for, and that certainly will not be easy,” Rep. Joe Barton (R-Texas) said July 22 during opening statements on the legislation.

Post-Acute Care Cuts

There appears to be bipartisan agreement that Medicare reimbursement to home health care providers and nursing homes could be cut to help pay for a doc fix, but that alone would not pay for the bill.

A doc fix bill also could be rolled into a larger budget and tax package that perhaps would be broached by Congress and the White House later this year, which could allow lawmakers to use unrelated health care provisions to offset the cost.

The Senate Finance Committee, which has jurisdiction over the issue in the Senate, has held some hearings on the issue but has yet to produce a proposal. The House Ways and Means Committee also is involved in crafting physician payment reform legislation.

AMA Reaction

In a July 23 statement, the American Medical Association said it was pleased the subcommittee advanced the legislation, but it added, “the details matter considerably and there is still work to be done to ensure a strong future for Medicare.”

“When crafting new payment systems, lawmakers must ensure that funding for Medicare’s payments to physicians is sufficient to allow for sustainable practice environments that give physicians the ability to invest in new ways of improving care for patients,” the association said.

“This includes maintaining budget neutrality related to adjustments to correct misvalued codes as part of that ongoing process,” AMA said. “Changes to quality reporting requirements should build on the existing system rather than attempting to implement a new regimen that adds administrative burdens and could distract from more effective efforts to improve patient care.”

Information on the draft legislation is at