House and Senate Begin Discussion of Permanent 'Doc Fix'
Tuesday, October 8, 2013
by: Policy Team

Section: Public Policy and Advocacy

The Sustainable Growth Rate (SGR) is a component of the formula that has been used by the Centers for Medicare and Medicaid Services (CMS) since 1997 to calculate physician reimbursements for Medicare services.  In 2002, however, the cost of medical care began to exceed the allowed SGR target, which is based on the gross domestic product—not actual rising health care costs.  This discrepancy has forced Congress to pass the “doc fix” bill every year to prevent payment cuts to physicians who care for Medicare patients.   
While lawmakers agree the broken system must be replaced, there is no consensus on the challenging issue of how to pay for the reform of the payment system. As a result, a temporary resolution is passed each year to override Medicare cuts.
In July, however, the House Energy and Commerce Committee passed the Medicare Patient Access and Quality Improvement Act of 2013, which would repeal the SGR and put in place a permanent fix. The proposed system would reward physicians for delivering quality care instead of quantity, or ensure they adopt an alternate payment model that would do so.
The bill includes new codes for reimbursing complex care management, as well as expanded recognition of nurse practitioners and physician assistants as health providers. If enacted, the new system would replace the current Medicare fee-for-service (FFS) payment structure.
The Senate Finance Committee has also taken first steps to craft its own version of legislation to fix the SGR but the committee has not yet started focusing on how the SGR bill would be paid for.
It is unclear whether or not the Energy and Commerce bill could win the support of the House Ways and Means Committee and Senate Finance Committee, both of which have an important role in designing any SGR permanent fix.  Both the full House and the Senate must pass legislation and the President must sign a bill before any changes in the current Medicare FFS structure can be made.  
Home health cuts are a potential source of “pay-fors” and VNAA is being pro-active in making the case that more cuts in home health would defeat the goal of reducing healthcare costs overall.  VNAA has argued that deep home health rebasing cuts or a copayment  and other potential cuts are not warranted and are counterproductive to the shared goal of reducing healthcare costs while maintaining quality.  
According to a recent estimate by the Congressional Budget Office (CBO,) the House bill would cost $175 billion over 10 years through 2023.  An earlier CBO report gave encouragement to supporters of an SGR permanent fix 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.  The fate of any SGR permanent fix plan and the source of “pay-fors” (new revenue or cuts in existing programs) to pay for the plan is yet to be determined. 
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