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Don’t Be Fooled, Prospects for Long-Term SGR Fix Still Dim

In light of Thursday’s bicameral, bipartisan release of a Medicare physician payment policy to permanently replace the Sustainable Growth Rate (SGR) formula – an achievement to be celebrated in its own right – some are seeing momentum toward passage of such a deal before the current doc fix  expires on March 31.

But the scope of what the committees issued Thursday represents as much of a step back as a step forward, at least relative to their aspirations and timeline for accomplishing them.

Once the appointment of Senator Baucus to be Ambassador to China was announced, the committees agreed to make it “as far as they could” toward a comprehensive SGR replacement policy prior to his confirmation, including identifying offsets to pay for the $125-150 billion (over 10 years) bill. For those who missed it, Senator Baucus was confirmed on Thursday.

Only in the past week did the key committees acknowledge that achieving agreement on offsets by this deadline was unattainable, but finalization of the so-called “extenders,” a hodge podge of Medicare payment plus-ups and other polices perennially included with the doc fix, was still the goal.

(Recall that the Senate Finance Committee passed an SGR replacement bill with extenders in December, but their House counterparts have yet to do so.)

In negotiations on that extenders element, House Republican leads reportedly would not agree to include beneficiary-oriented policies, such as funding for outreach to Medicare enrollees regarding low-income subsidy programs and for Family-to-Family Health Information Centers.

While some Democrats involved in the talks may have been inclined to make this concession, others sharply objected, scuttling a deal on this front and demonstrating the difficulty of compromise on this relatively non-controversial topic.

Furthermore, and has always been the assumption, identifying offsets for the package continues to be an exponentially heavier lift than any other aspect of the process. On that front, the key camps have outlined their broad parameters for what they might accept.

House Republican leads desire and likely require meaningful cuts to ACA-related spending as well as a substantial balance of Medicare beneficiary-impacting cuts, such as those relating to premiums and coinsurance.


On the other hand, Senate Majority Leader Reid, for example, has repeatedly voiced his opposition to any policies deemed adverse to Medicare beneficiaries being used as an offset to an SGR bill, not to mention his outright dismissal of cuts to central ACA programs. Senator Reid has gone so far as to say that he’d only accept cuts to the Offshore Contingency Operations (OCO) fund as a pay-for for the permanent SGR bill.

Part of Leader Reid’s position relates to the potential vulnerability of the Democrats’ control of the Senate in the 2014 election cycle. Try this understatement on for size: It’s hard to imagine a viable path to circumventing the stand-off between his position and that of the House Republicans.

While these various challenges to passage of a permanent SGR bill have been reasonably expected for some time (some of you have a faint “duh” percolating), it’s the past 5-10 days, including Thursday’s release, that actually demonstrate the odds of achieving this goal are truly minimal. In short, a breakthrough was possible but did not come to pass.

The Hail Mary was thrown, tipped, bobbled and … Richard Sherman just told me they shouldn’t try again. Take it from this Broncos fan, he’s probably right.

So it’s time for a field goal. A fallback is already in the works, at least in some corners. There’s a fairly unified assumption that a nine-month traditional doc fix will be that default option. The cost of that fix is approximately $15 billion, and we expect that soon the committees will turn their attention to finding the offsets to pay for that. So it’s more like a 57-yarder than a chip shot, but it’s a pretty good bet it’ll get done.

Getting all of the leaders of the committees of jurisdiction – in both chambers and on both sides of the aisle – to agree to a unified approach to reforming Medicare physician payments is an historic achievement, and those who have labored so devotedly to the task for more than a year deserve an extraordinary amount of credit.

But it’s really what Thursday’s package lacks, at this point, that tells the story. And that story, which began with the establishment of the ill begotten SGR formula in the Balanced Budget Act of 1997, doesn’t look like it’s going to end any time soon.

Billy Wynne is the Founder and CEO of Healthcare Lighthouse, a one-stop shop for comprehensive policy information for healthcare organizations and businesses. He is also a Partner at the Washington policy and lobbying firm Thorn Run Partners. Previously, he served as Health Policy Counsel to the Senate Finance Committee.

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5 replies »

  1. Vince:

    It’s true Congress removed the 9-month doc fix from the debt limit bill, in part because a “clean” bill was all that could pass the House but also, in part, because the physician community (including some House Members) objected. But, unfortunately, I would not call it off the table; it’s still the most probable outcome by the March 31 deadline for action.

    Doctors have some leverage but there are reasons that go much deeper than apathy that explain why a permanent SGR repeal has been so elusive. I wrote three doc fix bills for Chairman Baucus when I worked on the Finance Committee, and each time our goal was a permanent fix. Two of those times, top physician groups opposed the bill or remained neutral because they were only stop-gap solutions.

    But for every doctor that tells their patients Congress has dropped the ball on this, there are hospital administrators, nursing home aides, insurance brokers, and a milieu of other healthcare stakeholders who stand ready to do the same if their payments are cut to fund the cost of SGR repeal, which would be the case if it happens. Not to mention AARP and co., who will pounce if any changes are made that adversely impact beneficiaries.

    You could argue that these stakeholders are paying anyway, and that, in the aggregate, the piecemeal approach ends up costing (and thus cutting) more than a one-time, permanent fix would. But, when push comes to shove, most would rather pay something later than everything now.

    Another deep-seeded challenge is the sharp political differences over what aspects of healthcare should be cut to pay for a long-term bill. Party ideology doesn’t really come through when designing value-based payments for doctors; but they do when trying to identify means of reducing healthcare spending.

    As I allude to in my piece, in exchange for their votes, Republicans want to cut ACA subsidies or premium stabilization programs in addition to potentially increasing premiums or cost-sharing for Medicare beneficiaries. Democrats prefer to include none of those and are holding out hope that the OCO (Iraq and Afghanistan war reserve) fund can be tapped. The gap here is probably even wider than it looks on paper.

    So, believe me, I sympathize with the frustration of the physician community but, for what it’s worth, it’s not that Members of Congress don’t care or think that somehow the SGR is acceptable policy. They are also very frustrated with the perennial need to “patch” these Medicare payments. But, on balance, the challenges and pitfalls of passing a permanent fix have, thus far, always outweighed the benefits.

    Not to beat a dead horse, so to speak, but it’s probably helpful to keep the “headline” factor in mind here too, because that’s also a fairly intractable problem that perhaps some creativity could help resolve. At that level, by which most Americans follow an issue like this if they follow it at all, this issue is about spending $125 billion or more on doctors. That’s not something that really resonates on Main Street.

  2. Billy,

    Thanks for your perspectives. I appreciate that you are much closer to this issue than the rest of us.

    My understanding (as of yesterday) is that the 9 month SGR fix proposal is off the table. My distant interpretation of this is that the doctor associations are making a 4th down play attempt to get the ball over the line — field goal is not an acceptable option.

    What leverage do the docs have? If the SGR fix isn’t passed, every patient in America will hear about this while in the exam room with their MD.

    Do you interpret the likelihood of passage any differently in light of developments of past few days?

  3. Simple fix: Pay every full time doctor $ 1 million per year with the proviso that they provide safe and cost effective care to all of their patients, and that they (and their hospital employers, if any) cease making up the real truth and faux indications for tests and procedures that are medical unnecessary.

  4. It’s consistent with what I suspected: no appetite for the “pay-fors”.
    A lot of the preliminaries were courtesy to Baucus, who really wanted to solve this issue before he left. I cannot tell you how disappointed I am in medicine’s representatives. They sold out their members for a crap payment scheme, and then didn’t get it!

  5. Great post. Classic Washington behavior.

    When they write the chapter about beltway politics in the last twenty five years, the SGR “doc fix” will be center stage, example A …

    Not at all surprising this story isn’t making it through the media filter …

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