House and Senate leaders introduced legislation on Thursday to permanently fix the physician's Medicare Sustainable Growth Rate (SGR) formula and extend CHIP and other "extenders,” while still working on offsets and other policies that will be attached. Although offsets might still be up for debate, a House summary from earlier in the week showed that $70B of the $213B would be paid for, with roughly half coming from provider/hospital payments and the other half coming from means testing, a shift in MA payments and limiting first-dollar coverage for Medigap. While the legislation still has hurdles, it would be a major positive for physicians that would no longer have to face this long-standing annual uncertainty.
SGR Details: The permanent fix of the SGR formula includes a 0.5% annual increase for five years. This had been expected to cost >$170B, vs. the $213B cost of the entire legislation. The remainder of the cost would come from extending CHIP along with other "extenders" that were not broken out in the summary of the bill.
Impact on Providers: While details are still being worked out, roughly $35B is expected to come from cuts to post-acute and hospital payments. Roughly $15B of the cuts are believed to be from post-acute (including LTACs), which compares to ~$100B in the President's budget. The remaining $20B in hospital cuts likely comes from previously-discussed coding-intensity adjustments and extensions to sequestration/DSH, which are essentially budgetary gimmicks.
MA Provisions: While details are lacking on a "shift in when MA payments are made to plans" (could just refer to means testing of some kind), the Medigap provision that limits first-dollar coverage starting in 2020 will likely increase the incentives for Medicare FFS beneficiaries to choose Medicare Advantage plans.
Other Proposals: The bill is also expected to make improvements to the value-based components of fee-for-service, and would also include a 5% bonus to providers that receive more than one-quarter of revenues from alternative pay models (starting 2018/2019). Another provision would pay physicians based on how well they coordinate care for the chronically ill patients. Lastly, means testing refers to charging wealthier seniors higher premiums for Medicare Part B/D.
Hurdles Remain: While House lawmakers have agreed on a general framework, both parties in the Senate will also need to agree on the deal. Senate Finance ranking Democrat Ron Wyden (OR) expressed concern regarding the size of provider cuts and the length of the CHIP extension, as they would like to see a four-year extension.
The SGR is slated to expire March 31st, so if no deal is in place by then, a temporary fix would be needed. So while hurdles still remain, an SGR deal would end a long-standing overhang to providers that have faced annual cuts to pay.