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CBO: Physician Payment Bill Would Cost Medicare Beneficiaries

Janice Simmons, for HealthLeaders Media, November 18, 2009

Medicare beneficiaries would pay $49 billion in higher Part B premiums between 2011 and 2019 under a bill (HR 3961) the House will consider Thursday that raises fees for physicians treating Medicare patients, according to Congressional Budget Office (CBO) estimates.

The bill, a companion to the healthcare reform bill (HR 3962) passed earlier this month by the House, calls for repealing the 21% fee reduction under the current sustainable growth rate (SGR) formula scheduled for January 2010. CBO said that enacting the bill would increase direct spending by about $210 billion over the next decade, but it would not affect federal revenues.

The changes to the SGR formula would increase the fees paid to physicians under Medicare by about $195 billion over the 10 year budget projection window, CBO said. The changes to the formula would also result in higher spending for both the Medicare Advantage (MA) program and the Department of Defense's TRICARE program, which uses Medicare's physician fee schedule to pay for physicians' services.

CBO estimates that changes under the bill would total about $64 billion over the budget window. The MA spending would rise because the benchmarks that Medicare uses to determine how much the program pays for those enrollees "are adjusted for changes in Medicare spending per beneficiary in the fee for service sector," CBO said. The benchmarks have been set for 2010 and will not be changed, so there would be no impact on MA spending until 2011.

In a joint letter to House Speaker Nancy Pelosi (D-CA), American Medical Association Executive Vice President Michael Maves and AARP CEO Barry Rand wrote that those "who are concerned about deficit spending must recognize that the past practice of 'temporary Band aids' on the SGR problem has only served to increase both the size of future cuts and the cost of subsequent interventions."

Under HR 3961, the SGR would be replaced with a new formula that:

  • Removes items, such as drugs and laboratory services not paid directly to practitioners from spending targets

  • Allows the volume of most services to grow at the rate of the gross domestic product (GDP) plus 1 percentage point per year (compared to GDP without any adjustment today)

  • Allows the volume of primary and preventive care services to grow at GDP plus 2% per year

  • Encourages coordinated care by allowing accountable care organizations to be responsible for their own growth paths, irrespective of reductions or increases that apply elsewhere in the system

Last month, in a 53-47 vote, the Senate turned down efforts to repeal SGR formula as proposed in a bill introduced by Sen. Debbie Stabenow (D-MI). Forty Republicans and 13 Democrats voted against the motion.


Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at jsimmons@healthleadersmedia.com.

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