On July 23, the U.S. House of Representatives’ Energy and Commerce Health Subcommittee approved draft legislation that would reform Medicare's much-criticized physician payment system. The legislation is scheduled to be considered by the full committee on July 31. The Energy and Commerce Committee posted a video on its website titled, “Bipartisan Voices to #FixSGR.”

Medicare Fee Schedule payments are currently determined by a Sustainable Growth Rate (SGR) formula that was adopted in the Balanced Budget Act of 1997, which the Centers for Medicare & Medicaid Services (CMS) is required to follow. Each year, calculation of physicians’ Medicare reimbursement for the following year using the formula results in substantial proposed cuts, which are routinely overridden by lawmakers in the annual ritual known as the “doc fix.” Many healthcare organizations, including the American Medical Association, Medical Group Management Association and American Hospital Association, have repeatedly urged Congress to find a permanent solution to the annual SGR problem.

The new proposed legislation would repeal the SGR formula in favor of a fee-for-service payment system with small (1/2 of 1%) annual payment increases. Beginning in 2019, physicians and other providers would be required to report quality measures, based on which their Medicare payments would be adjusted up or down by up to an additional 1%. Providers also would have the option to deliver care through alternative payment models aimed at improving care coordination and quality of care.

The Congressional Budget Office has said that freezing physicians’ Medicare reimbursement and preventing SGR-related cuts for 10 years would cost $139 billion. Although this cost is much lower than previously estimated, it is not clear how it would be funded.

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