Focus on:Medicare Physician Pay: Lawmakers Still Working on Long-Term SGR Reform

While Congress in late December passed a short-term Medicare Physician Fee Schedule patch blocking a planned 20.1 percent reduction in the fee schedule update for 2014, lawmakers still face the task of agreeing on a long-term fix to the sustainable growth rate (SGR) formula used to establish physician payment. Bipartisan SGR reform bills have been overwhelmingly approved by the Senate Finance Committee, the House Ways and Means Committee, and the House Energy and Commerce Committee, but differences in the measures must still be resolved, and spending offsets need to be identified. The Senate Finance Committee Dec. 19 released the text of a bill (S. 1871) that would permanently replace the current Medicare physician reimbursement rate system. Although the Finance Committee approved the measure on Dec. 12, the 322-page bill the committee released Dec. 19 is the first version available to the public written in legislative language. The Senate Finance bill would permanently repeal Medicare’s sustainable growth rate formula, which each year requires mandatory cuts in physician payments that are routinely canceled by Congress with what is commonly referred to as a doc fix. Replacing the SGR would be a new “value-based performance program” that attempts to align Medicare physician payments with medical outcomes, moving away over a period of years from the current fee-for-service system, which critics say rewards volume over quality. As the new system is being phased in, the Finance Committee bill would freeze guaranteed physician pay increases, or “updates,” for 10 years. The Finance Committee measure is similar to a bill approved Dec. 12 by the House Ways and Means Committee. However, the Ways and Means bill (H.R. 2810) would provide physicians with a 0.5 percent increase during each of the first three years of the new program. In October, the two committees released a conceptual summary of a plan developed by staff from both committees. However, the final bills approved by each committee differ in certain respects, including whether they freeze physician payments or allow small increases during the phase-in period. Unlike the Ways and Means bill, the Senate Finance bill also would extend a series of government health programs set to expire after Dec. 31. The two-year budget agreement recently approved by Congress includes a three-month extension of current Medicare physician pay rates through March 31 in order to allow lawmakers to agree on a final version of an SGR replacement plan. Another important part of any final SGR replacement plan is how the transition to the new system would be paid for—with cuts in other programs or new revenues. The Congressional Budget Office estimated that the Senate plan would cost $148.6 billion over 10 years. So far, lawmakers have said their focus has been on coming to agreement on the policy rather than the “pay-fors.” New Pay Incentives In addition to eliminating guaranteed annual increases through 2023, in subsequent years the Senate Finance Committee measure would provide physicians and other medical professionals who participate in “alternative payment models” annual increases of 2 percent. All other professionals would receive annual updates of 1 percent. Beginning in 2017, the new Value-Based Performance Incentive Program also would take effect, streamlining and consolidating three existing programs: the Physician Quality Reporting System, which provides incentives to professionals to report on quality-of-care measures; the Value-Based Modifier, which adjusts payments based on quality and resource use; and meaningful use of electronic health records. Anti-Fraud Provisions The Senate SGR reform bill includes several anti-fraud provisions, including strengthened penalties for Medicare and Medicaid fraud, improved fraud data sharing between federal and state programs, and enhanced monitoring of Recovery Audit Contractor (RAC)-identified overpayments. The bill includes provisions from the Preventing and Reducing Improper Medicare and Medicaid Expenditures (PRIME) Act (S. 1123; H.R. 2305), which was introduced in June by Sens. Tom Carper (D-Del.) and Tom Coburn (R-Okla.). A House companion bill to the PRIME Act was introduced at the same time by Reps. Peter Roskam (R-Ill.) and John Carney (D-Del.). The House SGR bill doesn’t include the PRIME Act provisions, but both the House and Senate SGR bills include provisions for the creation of a free, publicly accessible database containing Medicare claims data. Anti-fraud provisions in the bill include:

• Requiring the Centers for Medicare and Medicaid Services to adopt a National Prescriber Identifier to be used as the sole identifier for the Medicare Part D program;
• Requiring the Department of Health and Human Services (HHS) to create a system to monitor changes made to fix overpayment vulnerabilities identified by RACs;
• Requiring HHS to submit an annual report to Congress on the types of overpayment vulnerabilities identified by RACs, along with a description of efforts taken to fix them;

Three Percent Retention An additional anti-fraud amendment, sponsored by Sen. Charles E. Grassley (R-Iowa), was included in the Senate SGR bill, allowing the HHS Office of Inspector General to retain 3 percent of all recoveries related to false claims or fraud involving Medicare or Medicaid. The OIG would be able to use the 3 percent to boost oversight and enforcement efforts. This is similar to a provision enacted in 1994 that authorizes the Department of Justice to retain up to 3 percent of all recoveries that were based on civil debt collection litigation.