Proposed legislation that would repeal and replace the Medicare Sustainable Growth Rate (SGR) formula would cost $175.5 billion over a ten-year period, according to a Congressional Budget Office (CBO) report released late last week.  CBO’s report analyzed the potential budgetary impact of H.R. 2810, the Medicare Patient Access and Quality Improvement Act of 2013, during the period from 2014 through 2023.  The bill, which the House Committee on Energy and Commerce unanimously approved on July 31, 2013, would change the way Medicare payment rates for physician services are calculated and prevent a scheduled cut to physician payments.  Under current law, Medicare payments to physicians are set to decrease by roughly 24% in January 2014. 

If enacted, H.R. 2810 would replace the SGR Medicare payment formula with a payment system implemented in two basic phases.  From 2014 through 2018, there would be a 0.5 percent annual update to Medicare’s payment rates for services on the physician fee schedule.  Starting in 2019, Medicare’s payments to physicians would be determined in one of two ways: using a traditional fee schedule incorporating the 0.5 percent update but potentially adjusted, upward or downward, by an individual physician’s performance in the Quality Update Incentive Program (QUIP); or under the terms of an Alternative Payment Model (APM).  The bill permits a physician to opt out of the QUIP payment track for the APM.  According to CBO’s report, the bill does not set out a specific payment system under the APM but instead establishes a process for developing and implementing alternative models.

According CBO’s report, the annual 0.5 percent adjustment to physician payment rates would result in an estimated increase in direct spending of $63.5 billion for the 2014-2018 period.  For the 2019-2023 period, when physicians can chose between the QUIP and APM mechanisms, CBO estimates an increase in direct spending of $112 billion.  CBO also notes that H.R. 2810 is subject to “pay-as-you-go” rules, which require that any spending increases in connection with the bill be offset by spending cuts or revenue increases elsewhere.

For more information on H.R. 2810 from the Energy and Commerce Committee’s website, click here.