Seeking an SGR Solution

Sustainable Growth Rate (SGR) reform legislation would provide an ideal vehicle for repealing the failed HME bidding program and replacing it with a market-based pricing program (MPP). That is why AAHomecare is working to build support for H.R. 1717, the Medicare DMEPOS Market Pricing Program Act of 2013. Introduced by Reps. Tom Price (R-GA) and John Larson (D-CT), H.R. 1717 would fit well with an SGR bill. This is the HME industry’s opportunity to “fix” bidding by replacing it with MPP.

Congress originally enacted the SGR as part of the Balanced Budget Act of 1997 to restrain costs by automatically reducing physician reimbursement rates if spending crossed certain thresholds. However, over time the formula became widely viewed as significantly flawed. To complicate matters further, Congress has offset the cost of the annual patch in recent years by reducing payments to other Medicare providers, including those who provide homecare. Without Congressional intervention, physicians will face a 24.7 percent reduction in Medicare reimbursement beginning in January 2014. This year there is renewed interest in finding a permanent solution to replace the SGR, as lawmakers in both parties are increasingly frustrated with the annual ritual of scrambling to pay for yet another “doc fix.”

The biggest obstacle to enacting a longer-term fix has been offsetting the cost, which has hovered around $300 billion over 10 years for most of the last decade. For a variety of reasons this year’s price tag for reform unexpectedly dropped by more than half, reaching just $139.1 billion over 10 years. However, predictions are that any final long-term fix would cost closer to $150 billion after accounting for certain extensions of expiring Medicare provisions that lawmakers will likely include.

The significant drop in cost has sparked substantial interest and activity in both the House and Senate to capitalize on this opportunity and enact a permanent replacement system. House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Ways and Means Chairman Dave Camp (R-MI) wrote to health providers in April that “fixing the flawed SGR physician payment system is a top priority” for Congress this year. In the Senate, Finance Committee Chairman Max Baucus (D-MT) stated in May that it is “time to repeal the broken SGR system once and for all and end the cycle of expensive short-term fixes.”

Congress has already held four hearings this year on exploring alternatives to the SGR. Building on these bipartisan efforts, the House Energy and Commerce Committee released a legislative draft to reform the SGR in May. Although the committee retains primary jurisdiction over the issue, the legislative draft represents joint work from Ways and Means Republicans as well.

Signs suggest that the Senate is making complimentary efforts to the House’s work. Sen. Baucus and Finance Committee Ranking Member Orrin Hatch (R-UT) issued a letter in May asking physicians and other providers for ideas on how to improve the payment system. In addition, the committee’s SGR hearing on May 14 was the first one the chamber has held on the issue since 2007.

While lawmakers are making noteworthy progress, they have not yet addressed how they plan to pay for a replacement. Rep. Upton stated on June 5 that his committee’s legislative draft intentionally omitted specifying the “pay-for” to “avoid the error—made in years past—of discussing how to pay for reform before the policy is developed.” In fact, if Congress fails to take advantage of the lower price tag this year, it will likely be because of disagreements over offsets.

While lawmakers are deliberately staying mum on the precise nature of cost offsets, policymakers will likely borrow specific ideas from a range of sources including President Obama’s fiscal year 2014 budget, recent proposals from the Medicare Payment Advisory Commission and recommendations from outside organizations such as the Bipartisan Policy Center.

While the HME industry hopes to use SGR reform legislation as a vehicle to repeal and replace the current bidding program, providers also face some threats of cuts in any Medicare reform debate. This is because the administration and some congressional Democrats have consistently advocated for a proposal to tie Medicaid program reimbursement to Medicare bidding rates—thus far, unsuccessfully. As with the “doc fix,” there is significant momentum to stop Round 2 and implement MPP this year. Keep up the pressure on Congress to fix bidding and call your Representative today.