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Schwartz, Heck Reintroduce Bill to Repeal and Replace the SGR, CBO Reduces Cost of SGR Repeal

February 8, 2013—Reps. Allyson Schwartz (D-Pa.) and Joe Heck, D.O., (R-Nev.) Feb. 6 reintroduced the Medicare Physician Payment Innovation Act of 2013 (H.R. 574).  This legislation would repeal permanently the Medicare sustainable growth rate (SGR) formula; prevent a scheduled cut of over 26 percent in Medicare payments to physicians on Jan. 1, 2014; and set a path toward comprehensive payment reform with differential payment updates to physicians, according to specialty, during the five-year transition period.

Similar to the bill in the 112th Congress, H.R. 574 establishes a five-year period of payment stability.  Reimbursement to all physicians would remain level through 2014 and then would increase in each of the following four years by 0.5 percent for specialty physicians and by 2.5 percent for primary care, preventive, and care coordination services.

According to a summary from Rep. Schwartz’s office, in an effort to replace the current system, the bill instructs the Centers for Medicare and Medicaid Services (CMS) to produce a “menu [of] health care delivery and payment model options based on an analysis of its relevant evaluations and input from the provider community.” For physicians unable to participate in one of the “menu” options, this bill “provides two options for physicians with a demonstrated commitment to quality and efficiency… to participate in a modified fee-for-service option.”

To aid physicians in the evolution to new payment models, traditional fee-for-service (FFS) payments will be continued at 2018 levels for one year at the end of the five-year transition period. Physicians who choose to retain the current FFS model will be subject to reduced updates to both primary and non-primary care services.

H.R. 574 does make one change, however. The bill in the 112th Congress used excess funding from the Overseas Contingency Operations (OCO) budget to offset the cost of the legislation, the current version of the bill does not include offsets.  

In support of the bill, AAMC Chief Public Policy Officer Atul Grover, M.D., Ph.D., said, “The [AAMC] has long supported Medicare physician payment reform and elimination of the problematic Sustainable Growth Rate (SGR) formula.  This framework is a good first step and creates a stable payment system with predictable physician payment updates as we test and transition to new reimbursement models rather than simply providing a short-term patch financed with Medicare funds currently supporting other critical health care expenditures, including those that support the nation’s teaching hospitals.”

Rep. Schwartz said, “I look forward to working with…colleagues on the Ways & Means Committee to pass legislation this year that fully repeals the SGR and moves us toward our shared goals of rewarding quality, providing better integration and coordination of care, and ensuring seniors get the care they need when they need it.”

Rep. Heck echoed her comments, saying, “There is no single greater threat to the long-term solvency of Medicare and seniors access to health care than the broken Medicare payment system, or SGR. Each year, health care practitioners are faced with devastating cuts that could make it nearly impossible for them to continue providing care for Medicare beneficiaries.”

Additionally, the Congressional Budget Office (CBO) Feb. 5 released an updated Budget and Economic Outlook for 2013-2022, which significantly lowers its estimate of the cost to permanently repeal the SGR formula to $138 billion over 10 years, down from $245 billion, due to lower than expected growth in Medicare physician spending. 


Len Marquez
Director, Government Relations
Telephone: 202-862-6281


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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