The Sustainable Growth Rate (SGR) formula returned yesterday with 21 percent cuts to Medicare physician payments, although the actual effect won't be felt for a few weeks because of Medicare's ability to withhold payments for a period of time. Lawmakers have come up with a solution that is expected to be voted on when the Senate returns from recess, but it would add about $500 billion to debt by 2035.
The legislation replaces the large and blunt SGR-prescribed cuts with 0.5 percent payment increases for five years before freezing payment growth through 2024 alongside a new, consolidated quality incentive program for Medicare physicians, called the Merit-Based Incentive Payment System (MIPS). In a budget-neutral manner, the MIPS program would reward or penalized physicians based on quality, resource use, meaningful use of electronic health records, and clinical practice improvement activities. Simultaneously, the bill would also provide payment incentives for physicians to utilize alternative payment models (APMs), such as Accountable Care Organizations (ACOs), that reward quality of care over quantity of care delivered. From 2019-2024, physicians earning a significant share of their revenue from models that involve risk of financial losses and have quality measurement would get a 5 percent bonus payment each year. Over the long run, physicians in APMs would also receive annual updates of 0.75 percent while non-APM professionals receive 0.25 percent updates.
This new system is estimated to cost $175 billion through 2025 by the Congressional Budget Office, but lawmakers are choosing only to offset the $35 billion amount by which this policy exceeds the cost of a permanent payment freeze. There is at least some hope, though, that the reformed physician payment system can begin to slow costs and improve quality of care in Medicare.
In addition, the bill extends several "health extenders" that are often included with doc fixes. Most of the extensions run through 2017, but two policies -- the Qualified Individual (QI) program, which provides Medicare premium assistance for certain low-income beneficiaries, and Transitional Medical Assistance (TMA), which allows low-income workers whose income rises to temporarily keep Medicaid eligibility -- get permanent extensions. These extenders cost $19 billion through 2025 and are fully offset.