A bipartisan bill, H.R. 2, Medicare Access and CHIP Reauthorization ACT, would repeal the Sustainable Growth Rate (SGR) formula, which sets a cap on physician spending, and would revamp payment of physicians under Medicare. On March 26, 2015 the U.S. House overwhelmingly (392-37) voted in favor of the bill, also known as SGR replacement bill. The Senate will vote on the bill after recess.

The legislation was introduced by Speaker John Boehner (R, Ohio) and Minority Leader, Nancy Pelosi (D, California). It would repeal the SGR Medicare formula that imposes the imminent threat of cuts to Medicare providers and would eliminate the need for Congress to set payment rates for Medicare physicians annually – a process known as “doc fix”.  Since 2003, Congress has overridden the cuts imposed by SGR on 17 occasions, and the most recent override ends on March 31, 2015.  If Congress does not take action, Medicare payments to physicians will be cut by 21% on April 1, 2015.

 The H.R. Medicare Access and CHIP Reauthorization ACT will

  • Repeal the Sustainable Growth Rate Formula;
  • Ensure a 5-year period of annual increases of 0.5% in payments to physicians;
  • Set up a two-tier payment system that incentivizes a shift to value-based payment systems that reward physicians who meet performance thresholds and make care-coordination efforts for patients with chronic conditions;
  • Incentivize transition to alternative payment models (APMs) by requiring that physicians receive at least 25% of their revenue through an APM in 2018-2019, with an increased threshold overtime; and
  • Extend funding for the Children’s Health Insurance Program (CHIP) and community health centers for another two years.

These changes are estimated to cost approximately $200 billion, and $70 billion of that cost would be offset by two major program changes: (1) higher premiums for higher-income Medicare beneficiaries and (2) reduced governmental spending on supplemental insurance plans, increasing out-of-pocket costs for Medigap recipients.

Because the bill creates five years of payment stability and improves on the existing fee-for-service system, it has overwhelming and rare bipartisan support. President Obama is in support of this bill and commented, “This is how Congress is supposed to work.” He is expected to sign the agreement to repeal the SGR formula.  

However, both Democrats and Republicans have their reservations about the bill. Democrats are concerned about premium increases for higher-income Medicare recipients, while Republicans are worried about budgeting for the remaining $130 billion.

For more information, see these articles in the Washington Post and New York Times.