The (Un)Sustainable Growth Rate

It’s not every day that the House, Senate, and Congressional Budget Office (CBO) agree on something, but all three concur that the sustainable growth rate (SGR) has to go. In an attempt to control Medicare spending on physicians’ fees, Congress enacted the SGR formula in 1997. Although it has called for dramatic reductions in payments over the past decade, each year Congress has temporarily overridden the cuts and kept the SGR in place. According to the formula, physician fees should have been reduced by 27 percent on January 1, 2013, which could have a devastating effect on Medicare and the patients who rely on it. Now, for the first time since its conception, Congress is starting to admit there is a problem with the SGR, and both parties have recognized that the time to act is now.

Keeping score

To understand why legislators are so focused on the SGR and so motivated to work in bipartisan unity, you first have to understand the CBO and its all important scoring process. For every bill that costs money to implement, the CBO issues a report estimating its cost over a 10-year period based on economic projections and other factors. This cost estimate is the bill’s “score.” If new data become available, the CBO can rescore a bill before the end of its 10-year period, which can be a critical factor. 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.

The House made the first public move toward eliminating the SGR in February, with Rep. Joe Heck (R-NV) and Rep. Alyson Schwartz (D-PA) introducing the Medicare Physician Payment Innovation Act of 2013 (H.R. 574). Besides eliminating SGR, this bill seeks to institute annual reviews of physician payments, implement comprehensive preventive and primary care services, secure uniform payment rates, and stabilize the Medicare physician payment system as a whole.

The leadership of the House Energy and Commerce Committee (which oversees health) also drafted a bipartisan “prelegislation”—a discussion draft designed to promote conversation. This prelegislation proposes to repeal SGR by improving the fee-for-service program, eventually phasing in predictable alternate payment models. It would institute a three-phase process, with advancement predicated on the success of the previous phase. Each phase would afford physicians the opportunity to “opt-out” of the modified fee-for-service payment system and allow them to join an alternate payment model system.

This prelegislation also calls for a transition period for physicians during which current payment incentives—such as the Physician Quality Reporting Program (PQRS) and Electronic Health Record Meaningful Use Program—would still be applicable for a 5-year period. The legislation also proposes an annual payment increase of 0.5 percent per year. After the transition period, reimbursement would be tied to performance on quality measures.

Although the prelegislation has substantial bipartisan support and appears to improve payment accuracy for providers, it has not yet been given an official name or resolution number—two necessary legislative steps for it to reach the House floor for consideration.

The Senate is also feeling the pressure to replace the SGR. In May, Senate Finance Committee Chairman Max Baucus (D-MT) and ranking Member Orrin Hatch (R-UT) released a joint statement to the health care provider community outlining goals similar to the House initiatives. Both senators agree that repealing SGR is a top priority for their committee. The Senate has offered fewer specifics about what a replacement plan would look like, but has generally stated that physician services be appropriately valued, and that incentive payments for physicians would likely facilitate reduced Medicare spending growth.

As of press time, it is uncertain whether the House bill will gain support, or if the Senate will draft a bill of its own. While the exact solution has yet to take shape, Congress’ interest in replacing SGR remains greater than it has been in at least a decade—a promising sign. 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.