Medicare Doc Pay Fix Seen Moving Ahead Despite Fiscal Debates in Congress

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By Ralph Lindeman  

Sept. 24 --With much of Congress consumed by partisan debate over government funding and debt limit issues, progress continues to be made on legislation overhauling Medicare's problematic physician reimbursement system, according to lawmakers, congressional aides and outside stakeholders.

“We're making progress,” Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, told Bloomberg BNA Sept. 24.

Asked if he expected the Finance Committee to produce its own version of a bill to repeal and replace the current Medicare physician payment system within the next month, Baucus responded, “We're hopeful.”

In late July, the House Energy and Commerce Committee--with bipartisan support--released a 70-page draft bill (H.R. 2810) that would replace Medicare's physician payment system.

Subsequently, the bill was passed unanimously by the House Energy and Commerce Committee on July 31.

The Energy and Commerce proposal would eliminate Medicare's so-called sustainable growth rate (SGR) formula, which each year mandates cuts in physician payment rates that are regularly canceled by Congress with a legislative “doc fix.”

Replacing the current Medicare fee-for-service payment structure would be a new system that bases physician Medicare reimbursements on how well providers meet new quality guidelines.

During a five-year phase-in period beginning in 2014, the new system would provide physicians with modest annual reimbursement rate increases of 0.5 percent before the system was fully implemented in 2019.

Physicians could also opt to participate in demonstration programs featuring alternative payment models aimed at coordinating care and improving quality for patients, according to the Energy and Commerce proposal.

Focus Shifts to Other Committees

Since release of the Energy and Commerce proposal, attention has turned to the House Ways and Means Committee and Senate Finance Committee, both of which must sign off on any SGR replacement plan.

The Ways and Means Committee is likely “to put its mark” on the Energy and Commerce bill “in relatively short order,” a senior Republican aide on the Energy and Commerce Committee told Bloomberg BNA.

“Then it will be a question for House leadership on whether to make this bill part of a legislative package or move it to the floor individually,” the aide added.

Sara Swinehart, a spokeswoman for the House Ways and Means Committee, declined to comment on a timetable, telling Bloomberg BNA, “We are continuing to work with our Ways and Means Democrats to craft legislation.”

The Energy and Commerce aide discounted any notion that momentum was slowing to enact some type of SGR change this year. “Look, there are big things out there right now that are consuming some oxygen,” the aide said. “But I'll tell you that for the health care community, there's no bigger issue. We're going to try to keep this issue alive as much as possible.”

Senate Finance Committee Action

The Senate Finance Committee is moving ahead on its own version of an SGR replacement bill. Members of the committee held their first discussion on SGR reform in a closed-door meeting July 31, the same day the House Energy and Commerce Committee approved its proposal.

“With the [continuing resolution] and debt limit debates dominating the conversation in Congress, the Finance Committee is able to work behind the curtains and very quietly,” a senior Republican Senate staff member told Bloomberg BNA. “Ultimately, that's not necessarily a bad thing.”

Dan Boston, executive vice president and principal with the consulting firm Health Policy Source, told Bloomberg BNA, “We don't know whether the Senate Finance Committee would put out a position paper or full-blown legislation, but we understand they'd like to move something within the next month.”

A senior Democratic aide on Senate Finance indicated the committee has not yet started focusing on how the SGR bill would be paid for, a key issue.

“The discussion is currently focused on policy and ensuring there is agreement on how best to replace the SGR,” the aide told Bloomberg BNA, adding, “Once policy is settled, the discussion will switch to offsets.”


According to a recent estimate by the Congressional Budget Office, the House bill would cost $175 billion over 10 years, through 2023 .

An earlier CBO report gave encouragement to supporters of an SGR replacement plan . Citing a slowdown in the rate of Medicare cost increases, the CBO estimated the cost of “freezing” physician Medicare payments at about $138 billion over 10 years, sharply lower than previous estimates.

Because the Energy and Commerce proposal would also allow for yearly increases of 0.5 percent over five years, the CBO's $175 billion cost estimate for the committee's proposal is higher than the freeze estimate.

What new revenues or offsets--also known as “pay-fors”--might be used to cover the bill's cost could ultimately be decided by the House Rules Committee, according to Boston at Health Policy Source. Before any bill reaches the House floor, the Rules Committee establishes the terms and conditions for debate on the measure.

With the CBO estimate providing a hard number for the cost of the SGR replacement measure, a few House conservatives have expressed misgivings about the bill's fiscal impact.

Julius Hobson, a senior policy adviser at Polsinelli PC in Washington who represents physician groups, discounted objections to the bill because of its cost.

“It was always going to be the case that some House Republican freshmen might be unwilling to do something on this,” he told Bloomberg BNA. “It's just up to the other members who have been around a while to work to convince everyone that this is within reason and needs to be done.”

Rep. Kevin Brady (R-Texas), chairman of the Ways and Means Health Subcommittee, plans to look for ways to reduce the cost of the CBO estimate of the bill, according to Swinehart, the committee spokeswoman.


To contact the reporter on this story: Ralph Lindeman in Washington at

To contact the editor responsible for this story: Brian Broderick at