Kicking the SGR Can Down the Road

Once again, Congress must address the sustainable growth rate (SGR) formula. The current law mandates an approximately 24 percent reduction to Medicare physician reimbursement for 2014. Each year Congress has prevented most of these pay cuts from taking effect. Although Congress has long recognized SGR’s flaws, it has been unable to fund a permanent fix.

The SGR and the Congressional Budget Office

For every bill that costs money to implement, the Congressional Budget Office (CBO) issues a report estimating its cost over a 10-year period. Based on economic projections and other factors, this cost estimate is known as the bill’s “score.”

In February 2013, the CBO released a new report stating the cost of repealing the SGR system had been overestimated by nearly a billion dollars. It became apparent that it would cost more to fix the SGR than it would to abandon it and start from scratch. Clearly, the CBO understands the financial advantage of a new system.

So is Congress the problem?

If the CBO recognizes the benefits of replacing the SGR, it would be natural to assume the usual health care political games and congressional hold-ups that we have seen in the past are responsible for holding it up. But that assumption would be wrong. Legislation to replace SGR is gaining tremendous bipartisan support in both the House and the Senate. So if there is agreement on both sides of the aisle that the SGR needs to go and consensus on the legislation that will get that accomplished why have negotiations not made any real significant progress in the past year on the $150 billion bill? Where is the problem?

The answer is the up-front cost of replacing the SGR. Offsets are needed to defray the cost of permanently replacing the SGR. In order for a replacement to be put into place, Congress has to either cut money from other programs or come up with a new funding source. With such a large offset needed and few ideas for ways to pay for it, it looks like SGR will be receiving another Doc-Fix Act or “temporary patch.”

Kicking SGR down the road?

Rather than fixing the problem with a new system, ASN expects Congress to mitigate the current symptom by passing a short-term patch, skirting the issue for the next 9 months. The short-term patch is estimated to cost approximately $10 billion to $15 billion and would cover the remainder of 2014. This patch would push SGR into a lame-duck session of Congress (the last 2 years of a president’s second term in office). Lame-duck sessions tend to be less politically charged and could provide a more likely environment in which to attempt a permanent SGR replacement.

Although there are serious efforts in Congress to pass a permanent replacement for the SGR, it seems unlikely that such a solution will be realized anytime soon.

ASN strongly supports efforts to replace the SGR with a more stable system that accurately reflects the value of physicians’ care, and is closely monitoring this issue on Capitol Hill. Stay tuned to ASN Kidney News as well as email communications from ASN to learn how you can get involved in advocating for a replacement to SGR.

March 2014 (Vol. 6, Number 3)