Price Cut Generates Momentum Behind Push to Revamp SGR

Bolstered by a huge drop in the price tag, committees in both houses of Congress are seriously working on a permanent repeal and replacement of the Sustainable Growth Rate (SGR) Medicare reimbursement formula.

Those familiar with the ongoing efforts say they are unprecedented; however, a sense of urgency remains that consensus must be reached before the August congressional recess, when members go home for summer vacation and when the Congressional Budget Office (CBO) could release new estimates that may once more increase the price of reform.

“I have been lobbying on this for at least 10 years, and this is the first time that congressional committees have actively sought input from the smaller medical societies. We’ve seen some of the things we’ve proposed now included in the legislative mock-ups. Before, you could only comment after the rule was made,” said James C. Denneny, III, MD, the coordinator for socioeconomic affairs at the American Academy of Otolaryngology-Head and Neck Surgery (AAO-HNS). “This is the first time I really think we’re going to get something done.”

The possibility of repeal has likely become more real thanks to new estimates by the CBO that an SGR freeze would cost $139.1 billion over 10 years, down substantially from the November 2012 estimate of $244 billion.

Until now, despite widespread agreement on the necessity of repeal and replacement among provider groups and many members of Congress, it’s been addressed only temporarily. Every year since 2002—and five times in 2010 alone—Congress has made only last minute, short-term adjustments. Meanwhile, in its June report, MedPAC estimated that the 2014 update, absent reform or yet another temporary “doc fix,” would be a 24.4 percent cut in payments.

In the report, MedPAC also reiterated its concerns about the SGR as payment policy: “The SGR formula may have resulted in lower updates, but it has failed to restrain volume growth; in fact, for some specialties the formula may have exacerbated growth. In addition, the temporary increases, or ‘fixes,’ to override the SGR formula are undermining the credibility of Medicare by engendering uncertainty and frustration among providers, which may be causing anxiety among beneficiaries.” In an April letter to Congress, MedPAC emphasized “that the time to repeal the SGR is now.”

The Proposals

Legislation is being prepared by the House Committee on Ways and Means, the House Energy and Commerce Committee and the Senate Committee on Finance. Providers, including Dr. Denneny’s team, have met with staff from all three to work on issues like transition, funding and the quality measures that are the current thinking on provider payments in the private sector as well. The proposals from the three committees have basic goals in common: