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Congress passes Medicare payment reform and eliminates SGR



April 17, 2015
Area(s) of Interest: Licensing & Regulatory Issues Public Payors 

Last week, the U.S. Senate overwhelmingly passed H.R. 2 with a 92-to-8 vote, which will completely overhaul the Medicare payment program. This move, which follows the U.S. House of Representatives’ near-unanimous vote two weeks ago, is a monumental, bipartisan action taken by Congress that negates the Medicare sustainable growth rate (SGR) formula and extends the Children’s Health Insurance Program (CHIP). President Obama signed it into law on April 16.


The California Medical Association (CMA), along with the American Medical Association (AMA) and other health care organizations, have been fighting to end the SGR for 12 years.


Without action by Congress, physicians faced a 21 percent cut in Medicare reimbursement the very next day. Senate leaders cleared the way for final passage by allowing votes on several amendments sought by both sides of the aisle.


“H.R. 2 is an unprecedented display of bipartisanship on the SGR. After more than a decade of inaction, this is truly a historic moment,” said CMA President Luther F. Cobb, M.D. “This legislation will substantially improve access to care for 5 million California seniors and disabled patients, nearly 1 million military families on TriCare, and nearly 1 million uninsured children.“


CMA applauds this rare bipartisan achievement in a deeply divided Congress. CMA, AMA and more than 780 state and national physician organizations supported the bill. The policy was developed jointly on a bipartisan basis by the three House and Senate health committees. U.S. House of Representatives Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) are credited with negotiating the budget offsets to fund the final SGR bill.


In addition to eliminating the SGR, H.R. 2 includes changes to the payment system. The other major provisions of H.R. 2 include:


  • Providing automatic, stable 0.5 percent updates each year for four years for Medicare Physician Fee Schedule services.

  • In 2019, physicians can choose to participate in one of two payment track options:

    • A fee-for-service track that simplifies and consolidates the existing quality reporting programs, reinstates large bonuses up to 9 percent and reduces current penalties or;

    • An alternative payment model track that provides 5 percent bonus payments and allows physicians to develop the new models, such as primary care/specialty medical homes.


    • Streamlining the Physician Quality Reporting System (PQRS), Meaningful Use (MU) and Value Based Modifier (VBM) quality programs to create the Merit-Based Incentive Program System (MIPS) quality program. Therefore:
    • PQRS, MU and VBM penalties will end in 2019.

    • The maximum MIPS bonuses and penalties will be 4 percent in 2019, 5 percent in 2020, 7 percent in 2021, and 9 percent in 2022 and beyond. Physicians are eligible for additional bonuses of up to 10 percent for exceptional performance.

    • MIPS scores will include quality, resource use, meaningful use and clinical practice improvement activities. The percentages are adjustable for individual physicians or group practices.

    • Quality feedback will be more relative and timely, and targets will be known at the start of each reporting period.


    • Physicians are also required to be involved in defining quality and in developing new payment models that are not specified in the legislation.

    • $125 million in funding to help small practice physicians transition to the alternative models or quality reporting programs

    • Reinstates bundled payments for the 10-day and 90-day global surgical services

    • Provides total cost of care data to help physicians better manage their practices

    • Mandates interoperatibily of electronic health record systems. By December 31, 2018, vendors will no longer be able to block interoperability.

    • Ensures that any practice guideline or payment policy in the ACA cannot be construed to be the standard of care for professional liability purposes.

    • H.R. 2 also allows for the release of physician claims data. This same data was released in August 2014 and the Centers for Medicare and Medicaid Services is planning on publishing 2013 physician claims data later this year. CMA is concerned about this provision and is working with AMA to advocate for improvements to this process, such as the ability for physicians to review and correct claims information.


      The bill represents a significant improvement over the current Medicare program, which mandates penalties of up to 13 percent in the coming years with no opportunities for payment updates or bonuses. By repealing the SGR and providing annual updates, it provides stability to physician practices that allows for longer term planning. Significantly, it allows physicians to design new payment systems that work for themselves and patients instead of government bureaucrats. It also mandates physician involvement in defining and developing quality measures. Moreover, now that the costly SGR is repealed, it will be much easier for physicians to work with Congress to make improvements to the payment system at a lesser cost. The enormous cost of the SGR had been a barrier to making any improvements.


      The bill also extends the expiring Children’s Health Insurance Program for two years at the higher Affordable Care Act (ACA) funding levels. It covers nearly 1 million children in California who would otherwise lose their insurance. CHIP was formerly known as Healthy Families in California before it was folded into the Medi-Cal program. It also extends the moratorium on recovery audit contractor audits of the hospital two-midnight rule, which helps hospitals and physicians. And, finally, it extends the National Health Service Corps and the ACA teaching health centers primary care residency training programs.


      Funding Sources:


      The Congressional Budget Office estimated that the cost of the bill would total $211 billion over 10 years and will not be fully offset with other funding sources.


      For 12 years, Congress has stopped the SGR payment cuts before they have taken effect; because of that, Speaker Boehner and Leader Pelosi concluded that any federal government savings would be phony and the cost to repeal SGR should be $0.


      Another $70 billion for the measure will come from deductibles for new MediGap policies starting in 2020. The top 2 percent of high-income seniors will see their premiums increase to 15 percent more for couples making $267,000 to $320,000, and 20 percent more for couples making more than $320,000 in retirement income. There will also be $35 billion in payment cuts to hospitals and other providing post-acute care services. This final cut does not apply to physicians.


      CMA thanks physicians for their extraordinary efforts to keep fighting to pass this monumental legislation. Fifty-two out of 54 members of the California Congressional delegation supported physicians on this subject. Unity within the physician community helped achieve this stunning victory.

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