A group of bipartisan, bicameral congressional leaders introduced a bill, on March 19, to repeal the Sustainable Growth Rate (SGR) formula that governs Medicare physician payment rates. The formula has called for dramatic payment cuts every year for the past 10 years, but Congress has passed several temporary “patches” over the formula through the years to keep physician payments steady. The current patch will expire on March 31, after which doctors will face a 21% reduction in Medicare payment rates. (See related post, CMS Releases the 2015 Medicare Physician Fee Schedule)

The SGR Repeal and Medicare Provider Payment Modernization Act of 2015 (H.R. 1407) would permanently repeal the SGR formula and replace it with a payment system designed to focus on quality instead of volume. It would consolidate three existing Medicare fee-for-service quality programs into one streamlined program that would reward providers meeting certain performance thresholds. It also aims to encourage providers to move away from traditional fee for service through alternative payment models that focus on prevention and coordinated care. The bill would provide a 0.5 percent payment increase for physicians through 2019 as the system transitions.

The bill represents a deal negotiated between House Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA), and is similar to legislation approved by House and Senate committees last year. But it does not address several other components that may be incorporated into the legislative package, such as extending the Children’s Health Insurance Program for two to four years, and temporarily extending Medicaid parity payments for primary care providers.

The total package is expected to cost over $200 billion. Only about $70 billion of that cost is expected to be offset by spending cuts, roughly split between cuts to Medicare beneficiaries (such as means testing for high income seniors) and cuts to provider payments (including hospitals, acute care providers and insurers). The remainder of the cost would be added to the federal deficit. More information on offsets is expected today.

Both chambers aim to vote on legislation next week before the current payment patch expires.