January 23, 2015

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The State of the Union is…
30 Hours: Corporate Welfare vs. the French
SGR: Tired of Kicking the Can
Arkansas Abandoning its Medicaid Alternative
Better Late Than Never
HUPAC Round Up
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SGR: Tired of Kicking the Can

This week, the House Energy and Commerce Health Subcommittee held back-to-back hearings on Wednesday and Thursday to address the Sustainable Growth Rate (SGR) formula. The Medicare physician reimbursement formula was developed in 1997 as a means to control Medicare spending so that annual expenses per beneficiary wouldn’t exceed the rate of Gross Domestic Product (GDP). However, as healthcare inflation has rapidly outpaced economic growth, Congress never allowed the formula to go into effect, and instead has passed 17 short-term patches, totaling $169 billion, to prevent a drop in reimbursement rates to physicians. The problem has only compounded with each temporary patch, and now the SGR calls for rate reductions of 24%. The current patch is set to expire on March 31, leaving many doctors on the verge of a significant drop in their reimbursements.

Over the past year, many in Congress have been encouraged to pass a long-term permanent repeal of the formula so that they won’t have to continuously deal with the issue anymore. As health inflation has slowed in the past years to closer in line with GDP, the cost of a permanent repeal has been estimated much lower than in previous years, with the current price tag estimated between $119-144 billion over 10 years, or about half the cost of what it had been in previous years. Last Congress shared in consensus to pass the permanent repeal, but was unable to come up with a pay-for.

The hearings’ witnesses this week included former U.S. Senator Joe Lieberman; Alice Rivlin from the Bipartisan Policy Center; Marilyn Moon from the American Institutes for Research; American Hospital Association President and CEO Richard Umbdenstock; AARP President-elect Eric Schneidewind; and doctors Alan Speir, Geraldine O'Shea, and Barbara McAneny; and Ken Miller, a nurse and Board president of the American Association of Nurse Practitioners. Lieberman discussed his work with former Senator Tom Coburn (R-OK) and argued for raising the age for Medicare and adjustments to Medigap, while others stressed the importance of a permanent repeal because of the uncertainty that the temporary measures cause for doctors.

Overall, the committee members expressed agreement in finding a way to get a long-term patch passed, but acknowledged that the pay-for would be a difficult task. Some of the Republican members pointed out that H.R. 30 was passed by the chamber without a pay-for and suggested that a permanent SGR repeal could be passed without an immediate pay-for given its importance. However, House Republican leaders have underscored that any measure must have a pay-for, pushing some members to consider using Overseas Contingency Operations funding or income-related premiums paid by high-income seniors. Democrats on the committee responded that reforms to Medicaid should not be put onto the beneficiaries and emphasized the effects of cost-shifting onto the poor.

Some in Congress have already recognized that a permanent repeal with a pay-for may not be possible before the current patch expires, meaning that they will need to do a two-step process of another short-term patch followed by a permanent repeal.

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