CBO: Senate plan for SGR repeal would cost $138B

The cost of repealing and replacing the troubled sustainable growth rate (SGR) formula with a new payment formula for physician Medicare payments will cost $138 billion over the next decade if lawmakers adopt the Senate Finance Committee plan, according to the Congress Budget Office.

The cost estimate came in a letter that CBO Director Douglas Elmendorf sent to Sen. Ron Wyden (D-Oregon), who chairs the Finance Committee. It estimates that the cost would break down to $60 billion between this year and 2019, and $138 billion through 2024. The annual additional outlays would be $5.3 billion in 2014 if adopted mid-year, reach $10.6 billion in 2015, and would mostly rise annually, reaching a maximum outlay of $17.4 billion in 2023.

"CBO's estimate of the budgetary effects of the legislation incorporates the effects of changes in Medicare spending for services furnished in the fee-for-service sector on payments to Medicare Advantage plans, on receipts of premiums paid by beneficiaries, on the likelihood that the Independent Payment Advisory Board mechanism would be triggered, and on spending by the Department of Defense's TRICARE program," Elmendorf wrote.

The plan would place physicians on one of two payment programs that would include incentives for keeping costs down and improving outcomes.

The cost estimate is halfway between the ones the CBO offered for two separate House proposals, which came in at $121.1 billion and $153.2 billion, respectively, according to California HealthLine.

The House and Senate came to an agreement last month on replacing the SGR, a plan that physicians hated ever since the government introduced it in the late 1990s. It has only been deployed a single year, with Congress authorizing annual "fixes" in its place. Under the agreement, physicians would receive payment bumps of 0.5 percent over the next five years.

To learn more:
- read the CBO letter (.pdf)
- read the California HealthLine article