Congress and Physicians Bid Farewell to SGR
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On April 14, Congress sent to President Obama a bill to repeal the Medicare sustainable growth rate (SGR) formula and chart a new path toward a physician payment system that rewards not for volume, but for value. The President has said he will sign the bill.

The vote ends a more than a dozen years of lobbying by the physician community to discard the flawed SGR. The SGR formula was enacted by Congress as part of the Balanced Budget Act of 1997. The formula limits growth in spending for physicians’ services by linking updates to target rates of spending growth. When spending increases exceed the targeted rate of growth, payments are automatically reduced across the board. The SGR formula did not control volume and was undiscerning about the quality or efficiency of care provided by individual physicians.

Only once did Congress allow a cut due to the SGR take effect, -4.8 percent in 2002. Since then, Congress has stepped in to avert cuts on 17 occasions.

The Senate passed the bill, the “Medicare Access and CHIP Reauthorization Act” (H.R. 2), by an overwhelming vote of 92-8 on April 14.  Senate action followed passage of the bill by House on March 26 by a vote of 392-37. 

The Senate rejected a dozen amendments to H.R. 2, including an amendment by Sen. Mike Lee (R-UT) that would have required the bill be fully offset, or paid for by corresponding reductions in federal spending. The bill includes an exemption from budget laws which allows $141 billion of the package to go “unpaid.” Had the amendment passed, the result would have been additional sequester cuts, including to providers, next year unless Congress found offsets.

Under the bill, Part B provider payments will be updated by 0.5 percent July 1, 2015 through Dec. 31 2015. In each of the next four years, 2016 through 2019, the payment increase will be 0.5 percent each year. Professionals who remain in fee-for-service Medicare will do so in exchange for zero updates in 2020-2025, with the opportunity to receive additional payment adjustments through a new quality incentive payment program.  In 2026 and subsequent years, professionals participating in advanced payment models that meet certain criteria will receive annual updates of .75 percent, while all other professionals will receive annual updates of 0.25 percent.

The bill will also extend funding for the Children’s Health Insurance Program (CHIP) through fiscal year 2017, which was set to expire on Sept. 30, 2015.

A summary  of H.R. 2 has been prepared by the Congressional Research Service.

In an effort to minimize financial effects on providers, the Centers for Medicare and Medicaid Services previously instituted a 10-business day processing hold for all impacted claims with dates of service April 1, 2015, and later. The 10-business-day hold means that April claims were held through Tuesday, April 14.  While the Medicare Administrative Contractors (MACs) have been instructed to implement the rates in the legislation, a small volume of claims will be processed at the reduced rate based on the negative update amount.  The MACs will automatically reprocess claims paid at the reduced rate with the new payment rate.  No action is necessary from providers who have already submitted claims for the impacted dates of service.

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