Repeals SGR Formula, Adopts Medicare and Other Policy Changes

Today the U.S. House of Representatives approved a major Medicare package, the Medicare Access and CHIP Reauthorization Act (MACRA), which would reform Medicare reimbursement policy for physician fee schedule services and adopt a series of policy changes affecting a wide range of providers and suppliers.

Most notably, the bill would repeal the statutory Sustainable Growth Rate (SGR) formula, which has called for deep cuts in Medicare rates in recent years, but Congress has routinely stepped in to override the full application of the formula. Instead, after a period of stable payment updates, MACRA would link physician payment updates to quality and value measurements and participation in alternative payment models. MACRA also would extend certain expiring Medicare and other health policy provisions, including a two-year extension of the Children’s Health Insurance Program.

To finance these provisions, MACRA would reduce Medicare market basket updates for post-acute care providers, revise Medicare inpatient hospital payment rate updates, restructure Medicaid disproportionate share hospital (DSH) reductions, require additional income-related adjustments for Medicare Part B and part D premiums, and bar first-dollar Medigap coverage policies.

Finally, the bill includes a number of other health policy provisions, including: new program integrity policies (including eliminating civil money penalties for inducements to physicians to limit services that are not medically necessary); a requirement that suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) that bid in a competitive bidding program obtain a bid surety bond that would be forfeited if the supplier does not accept a contract under certain circumstances; a delay in enforcement of the “two midnight” inpatient status policy; and revisions to Medicare payment for global surgical packages (including blocking a CMS decision to eliminate 10- and 90-day global surgical packages).

President Obama has promised to sign the bill if approved by the Senate. Timing is critical given that the latest short-term SGR “fix” expires at the end of the month, and physicians face a 21% across-the-board cut on April 1, 2015 in the absence of Congressional action.