House Committees Eye SGR Replacement

It’s looking likely that at least one committee in the House will take up the issue of the replacing the SGR before the August recess.

The sustainable growth rate, or SGR, was enacted by the Balanced Budget Act of 1997. The formula is intended to ensure that the yearly increase in expense per Medicare beneficiary doesn’t exceed the volume increase of the country’s gross domestic product (GDP). Four factors are taken into account, including the estimated percent change in fees for physicians’ services, the estimated percent change in the average number of Medicare fee-for-service beneficiaries, the estimated 10-year average annual percentage change in real GDP per capita, and the estimated percentage change in expenditures due to changes in laws or regulations. According to ModernHealthcare, the formula also includes a “clawback” mechanism that reduces Medicare fees if overall spending targets were exceeded the previous year.

The SGR formula produced a 4.8% pay cut to physicians in 2002, resulting in an outcry from providers. Since that time, Congress has suspended the SGR, or passed a patch for all Medicare physician fee cuts required by the formula. The repeated delays in payment reductions have produced the need for a larger and larger reduction each year. The latest required cut is 24.4% from Medicare physician fees, set to take effect Jan. 1, 2014. The increasingly large cuts needed according to the SGR, and the repeated patches or suspensions that Congress has had to pass, has resulted in many lawmakers talking about repealing the SGR and replacing it with a different formula.

At a conference last month, House Energy and Commerce Committee Chairman Fred Upton (R-MI) confirmed that his committee intends to take up the issue. The Energy and Commerce Committee and the Ways and Means Committees are both pivotal to overhauling the payment system. CQ reported that at the conference, Chairman Upton told reporters that the committees were on the same page.

This comment may soothe some rising concerns that the committees are moving on different timelines, at least temporarily. Ways and Means has direct jurisdiction over a number of potential payment offsets, which likely won’t be decided until much later this year when Congress considers debt limit legislation. However, Ways and Means Health Subcommittee Chairman Kevin Brady (R-TX) has said that his subcommittee will have a “laser focus” over the next month on finding the right replacement. Energy and Commerce aims to report out a bill soon resolving the policy details concerning what reimbursement approach should replace the SGR.

Neither committee has made public any specifics on what would replace the SGR.