House Bill Would Reform Medicare Payment, Eliminate SGR

The AAFP is urging Congress to act quickly on a bipartisan House bill that seeks to revamp the Medicare payment system by eliminating the sustainable growth rate (SGR) formula and initiating various payment reforms to reward the provision of primary care services, including via a 2.5 percent payment increase for primary care physicians.

"This legislation begins the transition to a sustainable payment system and helps our complex system better recognize the value of primary medical care," said AAFP President Glen Stream, M.D., M.B.I., of Spokane, Wash., in a prepared statement. "By providing a 2 percent higher payment rate for primary care services for the next several years, this bill improves the environment for currently practicing physicians."

At the same time, Stream said, the bill "tells medical students that we recognize primary care as the foundation to a high-quality, efficient health care system."

"But perhaps the most important feature of this bill is that it provides strong incentives for physician practices to transition to alternative payment systems that will improve care and help control costs," Stream added.

The legislation, known as the Medicare Physician Payment Innovation Act of 2011, was introduced by Rep. Allyson Schwartz, D-Pa., and co-sponsored by Rep. Joseph Heck, D.O., R-Nev.

"There is broad agreement that this is the way we ought to move," said Schwartz in an interview with AAFP News Now. "We need to repeal the SGR and replace it with a different payment system."

Schwartz said she did not know whether a replacement for the SGR would happen this year or in a subsequent year. However, "It is going to happen," she asserted.

If adopted, Schwartz's legislation would immediately eliminate the SGR formula, using savings from reductions in military operations in Iraq and Afghanistan to cover the $300 billion cost. In the process, the bill would block a more than 30 percent reduction in the Medicare payment rate scheduled to take effect on Jan. 1, 2013.

The bill would leave in place 2012 Medicare payment levels through 2013 to "ensure a workable transformation of the Medicare payment system over the long term and provide short-term stability in the Medicare program," according to a legislative summary of the bill released by Schwartz's office.

After 2013, the legislation would provide positive annual updates of .5 percent for all physician services for the next four years and a 2.5 percent increase in payments for primary care physicians during the same time period in an attempt to address "the undervaluation of primary care services, preventive care and care coordination services."

The bill also calls for the CMS Center for Medicare and Medicaid Innovation to test and evaluate payment models in different geographic areas and issue a menu of four health care delivery and payment models in which physicians and other providers can choose to participate.

"The strategy is to move us toward a payment system under Medicare that rewards quality and outcomes in a cost-efficient manner," said Schwartz. "We know it can be done. We are seeing innovative models both in the public and private sectors, and we should have a payment system that reflects that."

The AAFP is one of several organizations that worked with Schwartz in developing the legislation.