WASHINGTON, D.C. – Rep. Jackie Walorski (IN-02), last week voted for legislation that would permanently repeal the current formula that pays doctors who treat Medicare patients which has long been broken, and replaces it with a formula that returns stability to Medicare physician payments. The bill,H.R. 2 will resolve a long-running problem over how much doctors are paid by Medicare, passed the House by a vote of 392-37.
“This bill will provide better health care for seniors and real savings for taxpayers,” Walorski said. “With a permanent solution on the books that will provide stability to the Medicare program for seniors and stabilize physician payments I am grateful for our work to finally fix this flawed system once and for all.”
The flawed design of the SGR formula has called for payment cuts to providers annually over the past decade but Congress for nearly 20 years, has passed temporary “patches” in order to keep the physicians’ payment steady. Under H.R. 2, Medicare would increase payments to doctors by one-half of one percent each year through 2019. After that, a system would kick in where doctors would receive bonuses and penalties depending on performance scores from the government.
Instated through the Balanced Budget Act of 1997, the SGR is a formula that was intended to control the costs of Medicare provider payments. The formula was aimed at limiting the annual increase in cost per Medicare beneficiary to the growth in the national economy. The SGR is tied to the system for paying physicians known as a “physician fee schedule,” which lists over 7,400 unique covered services and their payment rates and reimburses physicians based on the volume of services rather than the actual value or outcome of services (keeping people healthy).
Under the extremely flawed SGR formula, if overall physician costs exceed target expenditures, an across-the-board reduction in payments is triggered. The target is based on spending growth in the economy – that’s where the “sustainable” part of the name comes from. However, this is not tied to quality or access to care. If Congress does not act by March 31, then payments to Medicare physicians would be reduced by 21.2 percent. Since 2002, Congress has stepped in with short-term legislation (often referred to as the “doc fix”) to avert the payment reduction. These patches have kept increases in physician payments below inflation over time, and have resulted in a huge divergence between the actual level of Medicare physician-related spending and the target in the SGR formula.
The bill now heads to the Senate for further consideration.
