SACRAMENTO - The California Medical Association (CMA) is pleased that legislation aimed at repealing the Medicare sustainable growth rate (SGR) was approved in the Senate Finance Committee and the House Ways and Means Committee today.

This is good news for California physicians, who have been working with both committees to revise the initial draft of the legislation since it was introduced in October. For more than a decade, Medicare’s flawed SGR formula has plagued policymakers and physicians, alike, often calling for reductions in payments to physicians despite the rising costs of providing health care. According to the formula, Medicare payments would be cut by roughly 24 percent in 2014, if no action were taken.

Congress has included a three-month SGR patch—with a 0.5 percent payment raise—as part of the federal budget agreement, which will help avoid these cuts on January 1, 2014, while a long term SGR solution is put in place.

As the estimated cost to repeal the SGR continues to decrease, California physicians are hopeful that Congress will finally act to eliminate it and replace it with a more stable payment system.  The cost is now expected to be $116 billion over the next 10 years, according to the Congressional Budget Office (CBO), down from previous estimates of both $138 billion earlier this year and $271 billion the year before.

"With the drastically reduced price tag of $116 billion, Congress must seize the opportunity to set Medicare on a more stable course for current and future generations of physicians and patients," says CMA President Richard Thorp, M.D. “While the bill still needs work, CMA supports moving the bills through committee to continue to move the process forward. This is the most progress Congress has made on Medicare physician payment reform in a decade and we need to keep the momentum going.”

In addition to repealing the SGR formula, the legislation currently before Congress also includes several provisions intended to reform the Medicare system, including automatic payment updates in the initial years, incentives to participate in new payment models, a phase-in period and funding assistance to help small practices transition to new payment models and retention of a fee-for-service program.

The House bill also now includes the California geographic payment locality update ("GPCI fix"), which would transition the outdated payment localities to the current and regularly updated metropolitan statistical areas used to calculate payments to hospitals. The Senate bill, however, does not include a GPCI fix. CMA will be working to include it in the final conference agreement.