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House, Senate Health Leaders Introduce Bipartisan, Bicameral SGR Replacement Framework

October 31, 2013

Washington, DC – Today, House Ways and Means Committee Chairman Dave Camp (R-MI), House Ways and Means Committee Ranking Member Sander Levin (D-MI), Senate Finance Committee Chairman Max Baucus (D-MT), and Senate Finance Committee Ranking Member Orrin Hatch (R-UT) released a discussion draft outline to permanently fix the broken Medicare Sustainable Growth Rate (SGR) formula.

The bipartisan, bicameral framework – released in a discussion draft – corrects a decade-long problem that has created uncertainty for millions of Medicare providers and beneficiaries.  The leaders of the House Ways and Means Committee and the Senate Finance Committee have collaborated closely to develop a framework to solicit input to begin the committee process for a full repeal of the flawed formula.

The discussion draft is available here.  Below is a summary of the SGR discussion draft.

“Providing a permanent solution to the broken SGR formula is vital to ensuring that seniors continue to have access to high quality care,” said Rep. Dave Camp, Chairman of the House Ways & Means Committee.  “This discussion draft is an important step in a long-term solution to this failed policy.  Creating a policy that rewards providers for delivering high quality, efficient health care is the ultimate goal, and this draft brings us one step closer to that reality.”

“This bipartisan framework is a welcome first step both toward fixing a broken formula that creates enormous uncertainty for health care providers and patients and also toward continuing the reform of our health care system,” said Rep. Sander Levin, Ranking Member of the House Ways & Means Committee.  “The framework builds off the tremendous work of the Energy and Commerce Committee and Rep. Allyson Schwartz, further emphasizing value over volume and innovative delivery systems within Medicare.”

“After much input from key stakeholders we have come together to create a permanent fix to the Medicare physician payment formula,” said Senate Finance Committee Chairman Max Baucus.  “For years, Medicare payments to doctors have been at risk of being slashed, limiting seniors’ access to high quality care.  Enough with the quick fixes.  Our proposal is for a new physician payment system that rewards value over volume.  It will go a long way in improving the efficiency and quality of care for America’s seniors.”

“For too long the flawed Medicare physician payment formula has jeopardized seniors’ access to the high quality health care they deserve,” said Senate Finance Committee Ranking Member Orrin Hatch.  “With short-term fixes, Congress for years didn’t meet the challenge with a real solution.  That changes with this bipartisan framework we are unveiling today. We have put forward a permanent solution that repeals the current broken doctor payment system and replaces it with an innovative, new way that rewards physicians who provide quality health care.”

Summary of the SGR Problem:

The Sustainable Growth Rate (SGR) formula – the mechanism that ties physician payment updates to the relationship between overall fee schedule spending and growth in gross domestic product (GDP) – is fundamentally broken.  Although originally introduced as a mechanism to contain the growth in spending on physician services, a decade of short-term “patches” has frustrated providers, threatened access for beneficiaries, and created a budgetary dilemma from which Congress has struggled to emerge.  Unless Congress acts by January 1, 2014, physician payments will be cut by approximately 24.4 percent.  Over the last decade, Congress has spent nearly $150 billion on short-term SGR overrides to prevent pending cuts.  

The 113th Congress has brought renewed commitment to repealing and replacing the flawed SGR update mechanism.  This effort has been helped by the significantly reduced Congressional Budget Office score for a freeze of physician payments over the next ten years ($139 billion) and the bipartisan proposal reported out by the House Energy & Commerce Committee in July.  Building on that effort, this bipartisan, bicameral discussion draft from the Ways and Means and Senate Finance Committees seeks to move away from the current volume-based payment system to one that rewards quality, efficiency, and innovation.

Key points on the SGR discussion draft. It would:

  • Repeal the flawed SGR mechanism, ensure payment stability for physicians, and ensure beneficiaries retain access to their physicians
  • Improve the physician payment system to reward value over volume, ensuring beneficiaries and taxpayers receive value for the money spent
  • Advance delivery system reforms and aligns public-private sector efforts
  • Improve the accuracy of payments for physician services   
  • Incorporate physician and stakeholder expertise  
  • Utilize physician-developed guidelines to avoid provision of unnecessary services
  • Reduce administrative burden on providers by aligning current physician quality programs
  • Provide timely feedback data to physicians and makes more Medicare data publicly available     

Summary of Discussion Draft:
The framework would permanently repeal the SGR update mechanism, reform the fee-for-service (FFS) payment system through greater focus on value over volume, and encourage participation in alternative payment models (APM), such as accountable care organizations and patient-centered medical homes.  The revised FFS system would freeze current payment levels through the ten-year budget window, while allowing individual physicians and other health care professionals (subsequently referred to collectively as “professionals”) to earn performance-based incentive payments through a compulsory budget-neutral program.  By combining the current quality incentive programs into one comprehensive program, this framework would further value-based purchasing within the overall Medicare program while maintaining and improving the efficiency of the underlying structure with which professionals are already familiar.  Professionals who receive a significant portion of their revenue from an APM(s) that involves two-sided financial risk and a quality measurement component (referred to as an “advanced APM”) would be exempted from the performance-based incentive program, and would instead receive a bonus payment starting in 2016.  By providing funding for measure development priorities for professionals, the framework would address the current gaps in quality measurement programs and ensure meaningful measures on which to assess professionals.

The framework would encourage care management services for individuals with complex chronic care needs through the development of new payment codes for such services, as well as leverage physician-developed standard of care guidelines to avoid the unnecessary provision of services.  It would also improve the accuracy of the physician fee schedule by setting a target for correcting misvalued services and allow for the collection of information on resources used in furnishing services.  

Recognizing the role of quality and resource use data in helping consumers make informed purchasing decisions and helping professionals improve their performance, the framework would expand the data available to qualified entities (QEs) for quality improvement activities as well as the information available on the Physician Compare website.