CBO Analysis Renews Calls for SGR Repeal

A Congressional Budget Office analysis released this week lops $107 billion from the cost of eliminating the Sustainable Growth Rate funding formula, and that new estimate has resuscitated efforts by some in Congress and the physicians' lobby to repeal the reviled but unenforced mandate.

The new projection, found on page 31 of the CBO's 77-page Budget and Economic Outlook: Fiscal Years 2013 to 2023, explains that repealing the SGR would cost $138 billion over the next 10 years—significantly less than the $248 billion priced in previous estimates. CBO attributed the lower cost to a decline in the rate of Medicare spending growth when compared with historic trends, and lowered estimates for spending for physician services.

Although the SGR has been around since 1997, the reimbursement cuts under the formula have never taken effect thanks, to the repeated interventions of Congress at the behest of physicians.

Most recently, SGR cuts of nearly 30% were scheduled to take effect on Jan. 1 to account for years of "kick the can" delays of smaller, incremental annual cuts. However, as it has done every year since the SGR went into effect, Congress on Jan. 1, 2013 stepped in to delay the cuts until Jan. 1, 2014.

The American Medical Association and other physicians' professional associations, weary of the annual Congressional sideshows and last minute repeals of looming SGR cuts, have for years made repeal of the mandate a top legislative priority. This week they were quick to line up behind the new CBO projections.

"The new cost of ending this problem is $138 billion, more than $100 billion below the previous projection and less than the $146 billion Congress has already spent on short-term patches to the SGR over the past decade," AMA President Jeremy Lazarus, MD, said in prepared remarks.

Anders M. Gilberg, senior vice president, government affairs, with the Medical Group Management Association, says the new estimates are a game changer that could finally lead to the permanent repeal of the decade-old SGR after years of stop-gap fixes and toothless threats of Medicare reimbursement cuts.  

"That is a significant shock to the environment in which we were having this discussion," Gilberg told HealthLeaders Media. "In Congress it is hard to say you are going to take a bill, drop it in and it is going to pass. But the climate for something like this has improved significantly because the impediment to passing this hasn't been the substance because there is near universal support for this. It was the cost. So, it's still a lot of money but that CBO report on is a significant catalyst. I don't think anyone has ever seen a drop like that—of $100 billion."

On Wednesday, U.S. Reps. Allyson Schwartz (D-PA) and Joe Heck, DO (R-NV) filed the Medicare Physician Payment Innovation Act to repeal the SGR and to create what they called "a clear path toward comprehensive reforms of Medicare payment and delivery systems."

"There is no single greater threat to the long-term solvency of Medicare and seniors access to healthcare than the broken Medicare payment system, or SGR. Each year, healthcare practitioners are faced with devastating cuts that could make it nearly impossible for them to continue providing care for Medicare beneficiaries. And each year Congress has avoided coming up with a serious solution to this problem," Heck said in a media release touting the bill.

"This bill is that solution. Our seniors and their healthcare providers deserve a program that is immune to Congressional dysfunction and that would provide stability by replacing the currently flawed formula with a system that promotes efficient, cost-effective healthcare."

The bill would:

• Permanently repeal the SGR formula.
• Provide annual positive payment updates for all physicians for four years.
• Ensure access to preventive care, care coordination, and primary care services through increased payment updates for those services.
• Aggressively test and evaluate new payment and delivery models.
• Identify payment models to provide options for providers across medical specialties, practice types, and geographic regions.
• Stabilize payment rates for providers who demonstrate a commitment to quality and efficiency within a fee-for-service model.
• Ensure long-term stability in the Medicare physician payment system through predictable updates that accurately reflect the cost and value of providing health care services in coordinated care models.

The repeal bill has the support of key physicians associations, including the AMA and the American Academy of Family Physicians.

"By permanently repealing the SGR formula, we end repeated threats to physicians' ability to provide care for Medicare beneficiaries," Jeff Cain, MD, president of the AAFP said in a media release.

"Equally important, this bill paves the way for innovations such as the patient-centered medical home. In doing so, it moves toward a system that improves quality while it restrains the growth in costs. We need to make sure our patients can get the right care from the right health care professional at the right time."

Richard "Buz" Cooper, MD, director of the Center for the Future of the Healthcare Workforce at New York Institute of Technology and a healthcare economist at the University of Pennsylvania, calls the new estimates and the legislation to repeal the SGR "an essential step." However, he urged caution.

"It will be important to remember why there was a problem in the first place," Cooper wrote in an email exchange with HealthLeaders Media. "The SGR was predicated on the belief that the growth of medical spending could be held to the overall U.S. economic growth rate. This was applied specifically to the physician portion, but there is no reason to think that it would be different from the rest. And after 15 years, we see the result of faulty logic. It will be important not to engraft that logic into current reform efforts. Healthcare spending grows more rapidly than the economy overall. To plan differently will be to repeat the pain caused by the SGR."

Gilberg says that even with the lowered cost projections, finding $138 billion in the midst of ongoing budget battles would be no small feat. "The impetus exists in a larger package, not in isolation," he says.

"Will $138 billion materialize out of nowhere in this environment to pass this bill? No. But if there is growing support for repealing SGR along the lines of what was outlined here, then could it realistically exist in some larger package? I certainly wouldn't write it off. I think it is serious. That CBO score is a pretty big catalyst that didn't exist ever before."