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Moving Past the SGR What it Means

March 24, 2015

This week, the House has an opportunity to finally move beyond one of the more problematic policy issues of this century: the sustainable growth rate (SGR). This flawed Medicare formula, which regularly threatens huge cuts to reimbursements for seniors’ care, has borne a cycle of funding crises and short-term fixes since 2003. It has also created instability for seniors and devoured Congress ability to focus on the real Medicare reform needed to save the program. Today, leaders from both parties introduced a plan to finally get rid of the SGR and put in place a better system for our seniors. Heres what the bipartisan agreement means: 

Stability for seniors

If the significant cuts required by the SGR went into place, far fewer doctors would accept Medicare patients, and more seniors would struggle to find the care they need. Thats why 17 times in the last 12 years Congress has been forced to intervene to stave them off with short-term fixes. The recurring threat of cuts has discouraged doctors from participating in Medicare and created a seemingly constant threat to access for our seniors. By repealing the SGR and replacing it with a better system, seniors can finally have the stability and access that they deserve. 

A more patient-centered system

But the agreement does more than make our outdated system more reliableit reforms the system so that its more focused on making the patient better. Right now, doctors in Medicare are reimbursed based on the quantity, not the quality, of the care they provide. That leads to higher costs and lower quality care. Instead, this agreement creates a new system that rewards positive health outcomes. This approach will put patients at the center of the system.

Structural reform to strengthen Medicare

While a long-term solution will still be needed to save Medicare for the future, this agreement makes two other structural reforms that would put the program on stronger footing. These reforms will provide significant savings over the long-term and offer a good first step toward keeping the promises made to our seniors. 

  • Increased means-testing
    House Republicans have long called for wealthier seniors to pay a little more for their Medicare coverage. Under this agreement, seniors with significant income in their retirement would pay a higher premium for Medicare Parts D and B. This reform would affect a small population, but it would yield tens of billions of dollarsor morein savings.
  • Medigap reform 
    Many seniors have Medigap coverage to pay for services not covered by Medicare, like co-pays and deductibles. This often entirely insulates seniors from the cost of care and drives up unnecessary utilization of medical services, which drives up costs for the system. Beginning in 2020, this agreement would bar Medigap plans from covering the first $147 of a beneficiary’s out-of-pocket spending so that cost is again a consideration in health care decisionssomething experts agree is needed to achieve savings over the long-term.

Reducing waste and fraud in the system

The House Ways and Means Committee has done significant bipartisan work to root out waste, fraud, and abuse in the Medicare system. The Committee recently approved the Protecting the Integrity of Medicare Act (PIMA), which consolidates several bipartisan waste-fighting bills introduced by committee members. This legislation, which you can read more about here, is included in the agreement. 

No tax increases 

Every attempt at entitlement reform in recent years has been derailed by a disagreement over the need for more revenue. By focusing on our common ground, instead of areas of disagreement, this proposal achieves important Medicare reform without raising taxes.

A clean slate for policymaking

Among the many problems with SGR is that it has distracted Congress from the real reform that is needed to save Medicare for our seniors. By finally repealing it, as well as addressing the expiring authorization for the childrens health insurance program, Congress can stop legislating by crisis and focus on the serious policy work that it was sent here to do.