Senate Punts on SGR Reform After House Passes Value-Based Incentives

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The overhaul would fix the Medicare reimbursement system and align payment with CMS' current efforts to reward value-based care. For the first time, the wealthiest seniors would be asked to pay higher premiums.

The US Senate adjourned this morning without voting to repeal the much-loathed sustainable growth rate (SGR) formula, a day after the House of Representatives voted overwhelming to move Medicare toward a value-based reimbursement system.

The House vote was 392-37, and President Barack Obama has said he is eager to sign the bill. CMS has indicated it can delay claims processing for a few weeks to avoid cutting reimbursement rates 21.2%, which would allow the Senate to return in April to take up the reform package.

The American Society of Clinical Oncology (ASCO), the American College of Surgeons, the American Medical Association, and scores of other groups have voiced support for the bill. The agreement would also extend the Children’s Health Insurance Program (CHIP) for 2 years, which was essential to gain Democratic support.

“Medicare’s outdated and inadequate system for reimbursing physicians is a threat to cancer care across the country,” said ASCO CEO Allen S. Lichter, MD, FASCO.

On March 19, 2014, leaders announced a bipartisan, bicameral deal to permanently repeal the mechanism that has never properly functioned for paying physicians, and instead left them hanging each year while Congress passed a series of fixes to avoid double-digit rate cuts to Medicare payments. The constant uncertainty has created a shortage of doctors willing to see Medicare patients, with an estimated 1 out of 4 seniors having trouble finding a doctor.


The current package is designed to end that frustration while moving the healthcare system away from fee-for-service (FFS) to one that rewards value. House Speaker John Boehner, R-Ohio, and House Minority Leader Nancy Pelosi, D-California, worked out an agreement worth $214 billion, offset by $70 billion in cuts elsewhere in Medicare and in provider payments, including those for post-acute care. Changes reflect recent moves by CMS to set goals of 30% in value-based Medicare reimbursements by 2016 and 50% by 2018.

Significantly, the wealthiest Medicare recipients will see premium increases—the first time ever the program has used a means test to offset costs.

The problem with SGR dates to 1997, when Congress created the formula in an effort to control spending. The formula was supposed to set realistic yearly and cumulative spending targets; if the cost of care exceeded the target in any given year, rates would be cut the following year to make up the difference. However, spending targets were unrealistic from the start and gaps between targets and actual costs emerged quickly.

To create a permanent fix, Congress needed to fund the entire cost, and for years that was the stumbling block. Covering the entire gap appears unlikely at this point, but many commentators said leaving the bill partly unfunded was preferable to another one-year fix. “The proposed reform is a rare example of a truly bipartisan effort to improve Medicare, and lawmakers can’t afford to pass it up,” wrote the Los Angeles Times in a recent editorial.

Elements of the deal include:

· Repeal the SGR while instituting a 0.5% payment update each year for 5 years. Under the schedule, rates would then hold flat for 6 years. After that, they would again see annual 0.25% payment increases.

· Institute a tiered system that provides incentives to shift more portions of the practice into value-based models, including accountable care organizations, bundled payments, and medical homes. This will align with recently announced CMS goals of shifting more Medicare payments into value-based care, with additional goals set for 2019 and 2023, with goals going beyond Medicare.

· Improve the FFS system by streamlining Medicare’s current mix of quality programs into one value-based performance program. It increases payment accuracy and encourages physicians to adopt proven practice.

· Make Medicare more transparent by giving patients more access to information and supplying doctors with data they can use to improve care, while giving doctors additional protections from medical malpractice claims as they transition to new electronic systems.

Strong bipartisan support for any legislation is rare these days in Washington, D.C., but the overwhelming need to fix SGR was reflected in an editorial from 2 physicians published in The Hill. Reps. Ami Bera, MD, D-California, Larry Bucshon, MD, R-Indiana, wrote, “Like most doctors, we got into the profession to care for patients, not to focus on billing codes, and we want to make sure that all seniors in the Medicare system get the full attention and care from their physician that they deserve, without worrying about additional copays.”

“We’re glad to see this addressed, and that members from both parties recognize that the first step in addressing many of our health care challenges has to be a payment system that aligns quality metrics and incentivizes high-value care,” they wrote on the eve of the House vote.