House Ways and Means Circulates Proposal to Fix Doctor Payment Formula

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Republicans on the House Ways and Means Committee are circulating a proposal to permanently repeal the Medicare physician reimbursement rate formula and replace it with a performance-based system using physician-endorsed quality-of-care measurements.

The three-page proposal obtained by BNA does not contain legislative language. Instead, it is a conceptual outline that describes the major components of a three-stage plan to replace the Medicare Sustainable Growth Rate (SGR) reimbursement formula. SGR has triggered physician pay cuts that have been averted at the last minute by Congress, most recently in a “doc fix” that was part of a budget legislative package at the start of 2013 (02 HCDR, 1/3/13).

“This is [the] first foray by the Ways and Means Committee to try to sell some ideas,” a senior House GOP aide told BNA Feb. 4. “We need to put out some bigger ideas and get some feedback to find out where people are on this,” the aide said. “This is not something you can just ram down people's throats.”

Proposal Contains Three-Phase Plan

Under the first phase of the Ways and Means proposal, the SGR would be fully repealed, and Medicare payments for physicians would be frozen for a set period of time that the proposal does not specify.

Under the second phase, the proposal says that “physician fee schedule payment updates would be based on performance [of] meaningful, physician-endorsed measures of care quality and participation in clinical improvement activities,” such as reporting clinical data to a registry or employing shared decisionmaking tools.

The third phase of the proposal calls for further reform of Medicare's fee-for-service payment system to account for the efficiency of care provided. After several years of quality-based payments, physicians who perform well on quality measurement would be afforded the opportunity to earn additional payments based on the efficiency of care they deliver, according to the proposal.

Asked about the proposal's lack of specifics, the GOP aide emphasized that it is in its early stages. “Practitioners will have to choose from a variety of new payment options,” the aide said. “We don't necessarily have the menu choices filled in yet, and some haven't even been envisioned yet.”

SGR Repeal Must Be Deficit-Neutral

Among the guiding principles set forth in the proposal is that the SGR reform “must not increase the deficit.” The proposal notes that the Congressional Budget Office has estimated the cost of repealing the SGR at $245 billion over 10 years. The proposal does not suggest how the measure would be paid for.

The absence of any discussion of how the proposal could be kept deficit-neutral is a key weakness, according to Julius Hobson, a policy adviser at Polsinelli Shughart PC in Washington. “Everyone in the health care community will fear the offsets [that] are going to come from them,” he told BNA.

Hobson suggested the proposal is unrealistic in assuming physician Medicare reimbursements could be frozen for as long as 10 years. “Obviously, the cost of this proposal would be even higher than the CBO estimate if payments go up,” said Hobson, a former director of congressional affairs for the American Medical Association.

The Ways and Means Health Subcommittee likely will hold hearings on the proposal “very soon,” the congressional aide said. “We need to get past the hearings focusing on 'SGR is bad,’ which we've had for 10 years, and get into more specifics.”

Circulation of the proposal follows a Jan. 15 statement by Rep. Kevin Brady (R-Texas), the new Ways and Means Health Subcommittee chairman, that he intends to draft legislation to repeal the SGR (13 HCDR, 1/18/13).

SGR Formula Long-Standing Problem

The SGR formula, included in the 1997 Balanced Budget Act, limits the yearly increase in costs per Medicare beneficiary to the nation's annual growth in gross domestic product. Because of the size of reimbursement cuts that would be required, Congress routinely overrides the SGR formula with a so-called doc fix.

Most recently, Congress included its doc fix as part of legislation (Pub. L. No. 112-240) passed Jan. 1 to avert the “fiscal cliff.” The one-year patch canceled a cut of 26.5 percent in physician reimbursements that had been scheduled to take effect Jan. 1.

The Ways and Means Committee efforts are being coordinated with the House Energy and Commerce Committee, according to the GOP aide.

By Ralph Lindeman  

Text of the Ways and Means Committee proposal is available at