So why is this such a big deal? First, let me give you some background.
A 1997 budget law aimed at restraining the growth of Medicare payments set the formula for physician rates that tied payment increases to growth in the economy (a.k.a. the Sustainable Growth Rate formula). When health-care costs rose faster than the economy, Congress began acting to override the cuts that the 1997 measure prescribed.
Over time, the prospective impact of those cuts has grown. On April 1st, for example, Medicare payouts would have dropped by about 24%. You imagine docs would be excited to see Medicare patients with that kind of cut???...there lies the problem.
Full repeal of the SGR was always talked about but never done because it would have to be offset by cuts elsewhere and the dollars were always too big. As a result, since 2003, Congress has passed short-term patches to stop the cuts, a maddening annual tradition known as the "doc fix".
An opportunity for reform occurred earlier this year when the Congressional Budget Office significantly lowered its estimate of what it would cost to repeal the formula, and pay doctors the current rate, from $245 billion over the course of 10 years to $138 billion.
You could almost hear Congress yell “Eureka! We’ve found it!”.
So here's the outline of the permanent fix:
Called the SGR Repeal and Medicare Provider Payment Modernization Act, the legislation would permanently repeal the SGR and provide an annual payment increase of 0.5% from 2014 through 2018. Starting in 2018, payments in the new system would be adjusted based on performance in the a new incentive-pay system, referred to as MIPS, which would consolidate three current incentive programs: the Physician Quality Reporting System (PQRS), which provides incentives for physicians to report on the quality of care measures; the Value-Based Payment Modifier, which adjusts payment based on quality use of resources; and meaningful use of electronic health records.
Additionally, it creates a Physician Compare website that Medicare beneficiaries can use to make decisions about providers, as well as to allow outside reviewers to evaluate quality of care.
So here’s the good news:
Physicians can finally have some predictability in their pay which they haven’t had in over a decade!
Imagine trying to run a business where a major source of your income could go down by 24%! The threat of major Medicare cuts made physicians pause on making major investments because they were always fearful of the “R” in the ROI. My hope is that this full repeal will provide physicians longer term budget certainty which, in turn, can result in them making more long term investments.
Here’s the other news:
This $134 million needs to be offset…by someone. At the time of me writing this, the offset has not been identified. Just know that every other provider is in full lobbying mode as they know that they will take from Peter to pay Dr. Paul.
So although you have three congressional committees submitting this (Senate Finance, House Ways and Means, & House Energy and Commerce), it's not a slam dunk just yet. Once the offsets are announced, the headwinds start to churn.