Half-Way There: Bipartisan, Bicameral Agreement Reached to Reform SGR

Last week, on the day Senate Finance Chairman Max Baucus was confirmed to his new post as Ambassador to China, the Senate Finance, House Ways and Means, and House Energy and Commerce Committees announced a bipartisan agreement to reform the Sustainable Growth Rate (SGR) formula for Medicare physicians, reportedly with a ten-year cost of $126 billion. If the so-called health extenders from the previous Senate Finance proposal were included as well, that would add roughly another $45 billion in costs through 2024, bringing the total cost to around $170 billion.

With the SGR set to cut physicians payments by nearly 25 percent on April 1, the three relevant committees have been working feverishly to reach agreement on a compromise set of reforms to encourage quality, rather than volume, of care. The compromise hems close to the previous committee proposals, particularly those from Senate Finance and House Ways and Means, but includes a few key changes and fills in much detail:

• Medicare professionals will get 0.5 percent annual payment updates through 2018, rather than the payment freeze offered by Senate Finance, and in line with the House Ways and Means proposal. These updates will add roughly $10 billion to the ten-year cost of the SGR fix compared to the Senate Finance proposal.
• However, possibly in exchange, the compromise bill would cut annual Medicare physician payment updates in half after 2023 from previous proposals – 1 percent for professionals paid through an Alternative Payment Model (APM) and 0.5 percent for everyone else, compared to 2 percent and 1 percent in previous iterations, respectively. This change will save the government close to $50 billion over the 2nd decade and in the range of $300 billion over the 2nd and 3rd decades combined, making it more likely that a fully offset final bill can greatly improve Medicare’s sustainability. This modification might also be an indication that CBO is planning to provide a rough estimate of the SGR’s bill budget impact in the 2nd decade, similar to what they have done for the Affordable Care Act and Senate immigration bill.
• Far more detail was added to precisely how the Merit-Based Incentive Payment System (MIPS) would work to determine some of Medicare’s payments to medical professionals. The system:
  • Reduces the initial amount of spending on MIPS-eligible professionals tied to the system’s metrics for quality, resource use, and meaningful electronic health record (EHR) use in 2017 from 8 percent in the original Senate Finance draft to 4 percent. Similarly, once fully phased-in by 2021, 9 percent of spending would be subject to such metrics rather than 10 percent.
  • Adds “Clinical Practice Improvement Activities” into the calculation to determine relative Medicare payments to professionals under the bill’s new Merit-Based Incentive Payment System (MIPS).
  • Specifies more precisely how the positive and negative payment adjustments would be determined.
• Provides $40 million between 2014 and 2018 to help small physician practices move toward an Alternative Payment Model (APM) or improve their MIPS performance, up from $10 million in the original Senate Finance draft.
• Sets up a process to develop qualified clinical decision support (CDS) mechanisms.
• Limits prior authorization requirements for advanced imaging for physicians with low adherence to “applicable use criteria,” now only allowed to apply to 5 percent of ordering physicians at most.

Even with all of this, though, they’re still only half-way home. Despite an agreement on how to reform the SGR, the question of how to pay for the roughly $130 billion in new spending remains unsolved.