SGR deal reached, but funding obstacles ahead

Now that Congress has come to terms on a deal to repeal the much-loathed sustainable growth rate payment formula for physicians participating in the Medicare program, it must now figure out how to pay for it. 

The SGR, introduced in the late 1990s, was actually applied only once about a decade ago, with Congress instead relying on annual "fixes" that essentially kept Medicare payments on an even keel. But doctors face an anticipated cut of 24 percent if  the government put all the deferred payments into effect, creating even more momentum in Congress to repeal it. Lawmakers reached a deal last week to replace the SGR with an incentive-based program that would focus on improving quality.

A repeal of SGR could cost about $245 billion over the next decade, according to Kaiser Health News, although Mother Jones reports it could be as little as $153 billion. 

That's significantly lower than in past years, primarily because cost increases for delivering healthcare have been relatively flat. Costs of the proposed scrapping of SGR includes 2.5 percent of payment increases to physicians over the next five years, compared to the 24 percent cut to physician payments if the SGR remains in place--a buildup of years of planned payment reductions that Congress averted with last-minute "fixes."

Moreover, the repeal legislation also does not include the cost of "extenders" to fund therapy services and ambulance services. It also doesn't provide extra payments to rural hospitals, as well as support a program that allows low-income people to keep their Medicaid coverage as they transition into employment.

Congressional Democrats have suggested funding the SGR fix with discretionary funds used to pay for the wars in Iraq and Afghanistan, while the senior advocacy group AARP has suggested using some revenue offsets involving the pharmaceutical industry, including changes to the Part D rebate program, according to Kaiser Health News.

To learn more:
- read the Kaiser Health News article
- here's the Mother Jones article

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