Congress Wrestles With Questions Surrounding SGR Repeal

For Lawmakers, Funding Remains a Sticking Point

January 26, 2015 02:29 pm News Staff

Although many members of Congress and health policy analysts agree the Medicare sustainable growth rate (SGR) should be repealed, finding a way to pay for it remains a stumbling block.

[Empty meeting room showing microphones and headsets]

The U.S. House Energy and Commerce's Subcommittee on Health recently held two days of hearings(energycommerce.house.gov) on the issue, seeking to push ahead with repeal of the flawed formula used to pay Medicare physicians. In what could be viewed as a signal of lawmakers' broad bipartisan support for repeal, the hearing was titled "A Permanent Solution to the SGR: The Time Is Now."

No new legislation has been introduced, but committee members indicated a strong desire to repeal the SGR. Yet despite achieving Medicare savings in recent years, committee members appeared reluctant to repeal the formula without identifying spending cuts elsewhere in the budget. Legislation on the repeal won bipartisan support in 2014 but did not pass because of disagreement about paying for the measure.

"We all agree on the policy, and we all agree that the previous (bill) is a good compromise," Rep. Frank Pallone, D-N.J., said. "The question that plagues us is the offsets. SGR should not be paid for off the backs of beneficiaries."

The AAFP submitted written testimony(7 page PDF) to the committee.

Story highlights
  • Members of Congress and health experts struggled to find agreeable methods to pay for a potential repeal of the SGR.
  • House members and health policy analysts said SGR repeal should not lead to higher costs for seniors.
  • Many of the suggested reforms call for higher premiums or would raise the age eligibility for Medicare.

"The AAFP strongly supports the immediate repeal of the SGR formula," the statement reads. "Under the SGR, physicians face unpredictable payments into the foreseeable future even while their practice costs continue to increase. According to the government's own calculations, the Medicare payment rate for physician services has for several years not kept pace with the cost of operating a small business that delivers medical care."

Some discussion focused on reforming Medicare benefits to help fund SGR repeal. Former Sen. Joe Lieberman suggested raising the Medicare eligibility age from 65 to 67. Other ideas ranged from introducing higher premiums for recipients based on their income to reducing Medigap coverage. Another suggestion would combine Medicare Parts A and B into a single program.

"The only way to save Medicare is to reform it," Lieberman said. "The SGR repeal gives you the opportunity to do that."

Pallone dismissed the idea of introducing complicated policy changes to the discussion.

Health policy analysts who testified noted that Medicare covers only 70 percent of the costs of services for beneficiaries and excludes vision and dental care. In the past 40 years, Medicare's annual spending growth has been lower than comparable private insurance plans.

"Medicare is in no way an overly generous program," said Marilyn Moon, Ph.D., a fellow at the American Institutes for Research. "SGR is poor policy and ought to be fixed, but beneficiaries should not be penalized for the poor policymaking that occurred so many years ago."

She cautioned that the number of seniors with high incomes is too low to justify charging higher premiums to individuals with higher incomes. Fifty percent of Medicare recipients earn an average of $23,500 annually and spend 17 percent of that on health care, according to Eric Schneidewind, J.D., president-elect of AARP. He said the typical Medicare beneficiary cannot afford to pay more out of pocket for medical care.

Schneidewind suggested that greater savings could be found by seeking larger discounts on prescription drugs. Congress could achieve more by allowing the HHS secretary to negotiate directly with pharmaceutical companies for lower drug prices, which is currently illegal.

Alice Rivlin, Ph.D., director of the Engelberg Center for Health Reform at the Brookings Institution, noted the recent reduction in Medicare costs could be attributed to the rise in alternative payment models such as accountable care organizations.

"It seems to be working and may be the reason why the slowdown has occurred, but we can't be sure," she said.

Lawmakers sought suggestions from those who testified about possible sources to fund the repeal, none of which included cuts to services or reductions in payments to institutions.

"What I'm hearing is that we want to do this (repeal SGR), but we don't want to do it here or here (with cuts in services or payment)," said Rep. Doris Matsui, D-Calif. "I'm looking at this and don't want to do it at the expense of seniors."

Rep. Joe Barton, R-Texas, suggested the SGR could be funded by a tax on Internet poker.

Besides cautioning members of Congress about the potential effects of raising the cost for beneficiaries, some people who testified sought to dissuade lawmakers from making cuts to specific medical institutions.

"Offsets should not come from other providers, including hospitals," said Richard Umbdenstock, M.H.S.A., president and CEO of the American Hospital Association. "Congress needs to move away from this practice. It is counterproductive to reduce hospital payments."

Pallone later voiced his support for greater access to primary care and mentioned the Medicaid-Medicare parity provision included in the Patient Protection and Affordable Care Act, which boosted Medicaid payments for certain primary care services to the level of Medicare payments.

He asked Geraldine O'Shea, D.O., first vice president of the American Osteopathic Association, if the measure helped increase access for patients and if it should have been extended past its 2014 expiration.

"Yes, the bump has helped, especially in California," she said. "There was a 10 percent cut several years ago. If you are not in a large health system, it is hard for smaller primary care physicians to accept the lower paying patients where (Medicaid) pays 22 cents on the dollar."

Rep. Michael Burgess, R-Texas, asked Barbara McAneny, M.D., chair of the AMA Board of Trustees, what would happen if Congress chose to "blow through deadlines" and neither repeal the SGR nor pass a temporary patch to prevent the scheduled pay cuts mandated by the formula.

McAneny, who runs a small practice in New Mexico, explained that what happens is that her practice suddenly stops submitting claims to Medicare because of the uncertainty about whether the situaiton will change. Cash flow drops very quickly, she said, and buying medical supplies becomes more difficult. The practice may even have to acquire a loan or a line of credit. When a patch is enstated, that means her practice can resubmit claims for Medicare payment at whatever rate goes into effect, but it necessitates an exhaustive audit to determine which claims have been paid at what rate.

"I haven't been able to give my nurses or staff a raise for the last two years," she said. "It's devastating to us as small businesses, it's devastating to us as physicians because we can't do what we were trained to do, which is to take care of the people who depend on us."


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