House Approves Short-Term SGR Fix as Part of SCHIP Legislation

The House recently passed a bill that would provide slight increases in physician payments under Medicare in 2008 and 2009 as a substitute for the steep payment cuts that were called for under the sustainable growth rate, or SGR, formula.

The provision, which was passed as part of a larger $50 billion bill to reauthorize the State Children's Health Insurance Program, or SCHIP, would provide a 0.5 percent increase in Medicare physician payments in both 2008 and 2009. If enacted, it would negate a 9.9 percent reduction in Medicare payment rates in 2008 and another 5 percent reduction in 2009.

However, H.R. 3162 (at the THOMAS Web site, type "HR 3162" in the search box after selecting "Bill Number"), which is known as the Children's Health and Medicare Protection, or CHAMP, Act, stops short of repealing the SGR. The SGR uses a formula to align actual spending rates with specified targets to determine Medicare payment levels. During the past six years, Medicare spending has exceeded targeted rates, triggering steep reductions in payments, which have been averted only by last-minute congressional intervention.

The original CHAMP Act, which was introduced last month in the House Energy and Commerce Committee and the House Ways and Means Committee, would have eliminated the SGR in 2010, but House members could not find enough offsets in the budget to pay for a repeal of the SGR. As a result, House members passed a bill that does not contain an SGR repeal, meaning physicians will face a 10 percent or 11 percent reduction in Medicare payments in both 2011 and 2012, unless Congress acts.

Jerome Connolly, senior government relations representative for the AAFP, called the House's passage of the CHAMP Act a "victory for all physicians" because it prevents steep Medicare cuts in 2008 and 2009. But he expressed disappointment with the House's failure to repeal the SGR altogether.

"We are back in the same situation as we were before, and that is, we are trying to figure out what can be done (about the SGR) and when it can possibly go," said Connolly. "But having the House on record as passing a bill that has a 0.5 percent increase for the next two years is good."

The CHAMP Act faces an uphill battle during the House and Senate conference committee process. The Senate passed its version of an SCHIP reauthorization bill on August 3. S.B. 1893 (at the THOMAS Web site, type "S 1893" in the search box after selecting "Bill Number") is a $35 billion bill -- significantly less than the $50 billon legislation approved by the House -- and it does not contain an SGR fix.

President Bush has vowed to veto the House and Senate bills, saying that both represent a massive expansion of SCHIP. However, the Senate version of the bill has good bipartisan support and is co-sponsored by key conservative Republicans, such as Sens. Orrin Hatch, R-Utah, and Charles Grassley, R-Iowa. This could make the bill more amenable to the Bush administration. In addition, the fact that the Senate bill costs $15 billion less than the House measure may make it acceptable to the White House in the final analysis, according to some Washington insiders.

"The Senate is going to try to persuade the House to keep the bill they send to the president as small as possible," said Connolly. That means no SGR fix if the Senate bill prevails, Connolly added.

Members of Congress have said repeatedly that they will not allow the SGR reductions to take place in 2008. The Senate Finance Committee is expected to address scheduled SGR reductions as part of a Medicare bill next month. Congress also may have the opportunity to attach an SGR fix to a larger appropriations measure if it passes an omnibus spending bill later this year, Connolly speculated.