Sustainable Growth Rate Reform: Close, But No Cigar

Ken Perez
Ken Perez

Guest post Ken Perez, vice president of healthcare policy, Omnicell.

“Politics is the art of the possible.” -Otto von Bismarck

This was supposed to be the year for permanent repeal of the sustainable growth rate (SGR), a formulaic approach intended to restrain the growth of Medicare spending on physician services. There was the rare cosmic convergence of bipartisan and bicameral support for SGR reform proposals at the end of 2013, and cost estimates by the Congressional Budget Office of a long-term “doc fix” reached new lows earlier this year.

But those hopes were dashed, as permanent SGR reform bills from both sides of the aisle died in the Senate. Instead, Congress agreed upon yet another short-term SGR patch. On March 27, 2014, the House, under a suspension of normal rules, approved via a voice vote a one-year patch to the SGR that would avoid a 24.4 percent reduction to Medicare’s Physician Fee Schedule (PFS) slated to take effect April 1, 2014 (replacing it with a 0.5 percent increase to the PFS for 12 months). Then on March 31, the Senate approved the patch via a roll-call vote, and President Barack Obama signed the bill into law that same day.

Why did the efforts to pass a permanent doc fix fail? The aforementioned bipartisan and bicameral support of SGR reform proposals was limited to “policy,” i.e., the future system by which physicians will be reimbursed by Medicare. Congressional Democrats and Republicans did not see eye to eye on the so-called “pay-fors” that would offset the increased government spending that would result with repeal of the SGR and allow the reform legislation to be deficit-neutral.

In fact, two last-ditch permanent SGR reform bills—one from each political party—each proposed a funding source that is anathema to the majority of the other party.

On March 31, 2014, before the Senate settled for a short-term doc fix, Republicans sought to introduce a bill that would pay for a permanent SGR repeal by delaying the health reform law’s individual mandate, but since the individual mandate is the centerpiece of the Affordable Care Act, the cornerstone of President Obama’s legislative legacy, it was dead on arrival in the Democratic-controlled Senate.

In like manner, Democrats presented a bill that would use funds available from lower-than-projected future Overseas Contingency Operations (military operations in Iraq and Afghanistan) spending. Most Republicans in Congress have questioned the validity of those savings. That bill likewise died.

So where does this leave us? A permanent SGR repeal remains elusive, but this latest short-term patch has bought Congress some time to focus on finding pay-fors that will be acceptable to some members of both political parties. The most likely solution would appear to be passage of a broad deficit-reduction plan that incorporates numerous new health reform components that would together fund a permanent doc fix, but that may not be possible until after the 2016 elections.

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