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House Unveils Bipartisan SGR Bill

Proposal transitions Medicare to value-based payment scheme

The House has unveiled a bipartisan proposal to permanently fix the sustainable growth rate (SGR) funding formula and to transition Medicare toward value-based payments.

“This package is the best opportunity to turn the page on years of short-term fixes so that we can finally make the reforms we need to strengthen Medicare for our seniors,” Ways and Means Committee Chairman Paul Ryan (R-Wisconsin) said in remarks accompanying the bill.

The SGR is a budget cap put in place by Congress in 1997 to control the growth of Medicare costs. It never worked, but rather than permanently fix the problem, Congress has spent $150 billion in 17 short-term fixes since 2003. The most recent “patch” is scheduled to expire on March 21, resulting in a 21% cut to physicians’ Medicare payments.

According to the House Energy & Commerce Committee, the new bill would:

  • Repeal the SGR and replace it with HR1470, a bipartisan, bicameral agreement that also transitions Medicare to a value-based payment scheme.
  • Provide 0.5% annual increases to Medicare payments for the next 5 years to provide a period of stability.
  • Delay disproportionate payment cuts to “safety net” hospitals until 2018 and extend the disproportionate share hospital (DSH) policy through 2025.
  • Delay until September 30 changes in the two-midnight rule on inpatient billing that were set to take effect at the end of this month.
  • Fully fund the Children’s Health Insurance Program (CHIP) through September 30, 2017.
  • Preserve all extenders included in 2014’s temporary SGR patch, including additional funding for community health centers through 2017.
  • Provide a 5% bonus to providers who receive a significant portion of their revenue from an alternative payment model or a patient-centered medical home.
  • Permanently extend Medicare’s “qualifying individual” program for low-income seniors and for the transitional medical assistance program, which helps families on Medicaid keep their coverage as they transition from welfare to work.

Repeal of the SGR and other provisions in the bill are expected to cost from $175 billion to $200 billion over 10 years, and it’s not clear where all of that money would come from in a Congress that is locked down against tax increases.

The House bill provides “offsets” for means testing for Medicare recipients that could generate some savings. For example, starting in 2018, premiums would increase from 50% to 65% for Part B and D beneficiaries who earn between $133,500 and $160,000 ($267,000 to $320,000 for a couple). For those in higher income brackets, the premiums would increase from 65% to 75%.

The plan also calls for limits on “first dollar coverage” for some Medigap plans, starting in 2020. The Internal Revenue Service would also be authorized to impose levies of up to 100% on tax-delinquent Medicare providers. Currently, the maximum levy is 30%. In addition, Medicare reimbursements would be increased by no more than 1% in 2018 for post-acute care providers.

Senate Democrats have said they can’t guarantee their support for the new bill unless it includes 4 years of additional funding for CHIP.

Sources: HealthLeaders Media; March 25, 2014; and House of Representatives; March 24, 2015.


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