Widespread agreement in Congress on the need to replace Medicare's payment system for physicians is offset by deep divisions over how to pay for a new reimbursement model.
With a two-day hearing being held this week in Congress, the annual scramble has begun to plug a gaping hole in the formula Medicare uses to calculate physician reimbursement.
In 1997, Congress crafted the Sustainable Growth Rate formula (SGR), which ties Medicare's payment rates for doctors to the projected growth of the national economy. But healthcare spending quickly outpaced economic growth, opening a multibillion-dollar gap in funding for Medicare payments to physicians.
Lawmakers placed the first temporary patch on SGR in 2003, and the quest for a permanent Medicare "doc fix" has become an annual ritual ever since. The latest SGR patch, which Congress adopted last winter after failing to agree on financing for a bipartisan SGR repeal-and-replacement deal at a cost of $128 billion, is set to expire on March 31.
On Wednesday, lawmakers and witnesses at a hearing of the House Committee on Energy and Commerce's health panel were unanimous in their desire to reach a long-term deal on Medicare's reimbursement system for physicians.
In his opening remarks, the chairman of the subcommittee, Joe Pitts, (R-PA), called finding a permanent replacement for SGR the paramount issue facing the health panel. "This subcommittee has made permanent repeal of the flawed Medicare Sustainable Growth Rate formula, or SGR, a top priority for the last four years. In 2014, we reached a bipartisan, bicameral agreement on a replacement policy that enjoys widespread support both in Congress and among the stakeholder community," he said.
In his opening remarks, Rep. Gene Green of Texas, the ranking Democrat on the health panel, noted that Congress has patched the SGR formula 17 times since 2003, at a total cost to taxpayers of about $169.5 billion.
In a report released this month, the Pittsburgh-based Center for Healthcare Quality and Payment Reform asserts an "urgent need" to repeal and replace the SGR. "The draconian 21% cut in Medicare payments to physicians that it requires would make it difficult for physician practices to survive, make it difficult for Medicare beneficiaries to get care, and shift Medicare costs to workers and businesses, while only reducing Medicare spending by 3%," the report states.
Paying for Replacement Remains Stumbling Block
Witnesses and lawmakers from both sides of the aisle called Wednesday for the resurrection of last winter's bipartisan deal, the SGR Repeal and Medicare Provider Payment Modernization Act. The 10-year replacement plan for SGR features a five-year period of stability in the Medicare payment system, with a 0.5% annual pay rate hike for doctors. In the last five years of the plan, the pay rate would be frozen and a series of reforms would be launched to help push Medicare physician reimbursement toward value-based models.
"After this hearing, we should wait no longer at rolling up our sleeves," said Rep. Frank J. Pallone Jr., (D-NJ). "We all agree the previous bill is a good compromise."
The first witness, former Sen. Joseph Lieberman (I) of Connecticut, said the lawmakers who crafted last winter's SGR repeal-and-replacement deal beat long political odds in an era of hyper-partisanship. "You've done something that's really been unheralded," he told the health subcommittee members. "You've come up not only with a fix, but a solution."
Despite widespread agreement on the need to repeal SGR and continued support for last year's bipartisan SGR repeal-and-replacement deal, deep divisions remain over how to pay for a Doc Fix.
Lieberman testified that lawmakers must offset the cost of repealing SGR to avoid hiking the country's national debt, which hit $18 trillion for the first time in December, according to the Department of the Treasury. "This is really unsustainable. It's sustainable only by placing an incredible taxation burden on our children and grandchildren," the former senator said, adding later that Congress must find a way to pay for replacing SGR. "I hope you offset the cost of the solution … because otherwise you are going to increase our national debt."
While posing questions to Lieberman after his testimony, Pitts said that any SGR repeal legislation will be doomed unless lawmakers can find spending cuts or Medicare beneficiary cost-sharing measures to offset the cost. "As a practical matter, the House leadership has said bills must be offset before they can be heard on the House floor," the health subcommittee chairman said.
Lieberman, who made an unsuccessful bid to overhaul Medicare in 2011 with former Sen. Tom Coburn of Oklahoma, strongly agreed with Pitts. "This extraordinary achievement … will not make it into reality unless there is an offset," Lieberman said.
Democrats on the health subcommittee were adamant that seniors not be saddled with the cost of a Medicare Doc Fix, and they called for tax increases to be included among the financing options.
After noting "this is the richest country on the face of the Earth," Rep. Jan Schakowsky said she is firmly opposed to asking seniors to pay higher Medicare premiums or deductibles. "I say shame on us that we can't provide healthcare to our seniors and people with disabilities. I find that repugnant and my hair is on fire."
Schakowsky added that reforms are slowing Medicare spending and have the potential to offset the cost of replacing SGR. "We are adding incredible savings as a result of the Affordable Care Act. I say, we have plenty of money," she said.
Payment Plan Proposal
Alice Rivlin, director of the Engelberg Center for Health Reform at The Brookings Institution in Washington, DC, testified that a combination of targeted cost-sharing for seniors and value-based reforms would be the best way to address the SGR challenge.
"You can replace the Medicare SGR; and, at the same time, you can begin phasing in reforms," said Rivkin, who served as director of the federal Office of Management and Budget under President Clinton.
Pitts asked Rivkin whether the slowdown of Medicare spending in recent years could justify not offsetting a doc fix. "Whether this slowdown continues depends on whether we make bolder moves," she replied, calling on lawmakers to press forward with payment reforms in Medicare such as bundled payments as well as efforts to foster accountable care contracting.
In the cost-sharing arena, Rivkin said carefully crafted measures would avoid placing an unfair or unsustainable burden on seniors and people with disabilities. "Means-testing of the premium—I think you can do that without hurting low-income people," she said.
Rivkin said deductibles could be added to Medicare in a way that would not result in seniors delaying necessary medical treatments. "You could have it not apply to physician visits," she said of new deductibles.
The health subcommittee's hearing is set to resume Thursday, with several witnesses including Richard Umbdenstock, president and CEO of the American Hospital Association.
Christopher Cheney is the CMO editor at HealthLeaders.