March 2015

By a strong bipartisan majority, the House passed legislation H.R. 2 to permanently repeal and replace the Medicare Sustainable Growth Rate factor – better known as SGR. The President has expressed his support for the bill. Unfortunately, the Senate failed to act on the SGR bill before breaking for the April recess.

While the Senate's failure to act before the April recess means Congress will miss the April deadline and Medicare physician reimbursement will be cut by 21.5% starting April 1, 2015, Congress is counting on CMS to "hold" payments submitted on and after April 1 – to give Congress more time enact an SGR fix. In the 17 times Congress has passed temporary SGR fixes, they have frequently relied on CMS to delay bill process to temporarily resolve the SGR debacle.

The SGR formula was devised by Congress over a decade ago to control rising Medicare spending on physician services, but has been criticized by nearly all health policy experts as being a poorly constructed cost containment tool. Over the years, the SGR formula has led to deep cuts in Medicare payments to physicians and other Medicare Part B providers.

The legislation that passed the House repeals the SGR formula and legislates the following payment updates:

• January – June 2015 – 0% update
• July 2015 – December 2019 – 0.5% update
• 2020-2025 – 0% update

The bill sets up a series of bonuses/penalties that Medicare providers will receive based on performance on quality measures. The bill also promotes the development of alternative payment models for Medicare physician reimbursement.

In addition to repealing and replacing SGR, the bill also funds the Children Health Insurance Program through 2017, delays CMS's proposal to unbundle global periods for surgical services, and extends other Medicare provisions.

It is expected that the Senate will consider the SGR bill quickly when it returns to session later in April.