CBO Cuts Cost of SGR Fix by Nearly $23 Billion

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New Federal spending figures from the November budget review have prompted the non-partisan Congressional Budget Office (CBO) to reduce its estimate for the total cost of repealing the Sustainable Growth Rate (SGR) formula that in theory controls Medicare physician payments.

According to the latest CBO figures, the cost to the government of chucking the SGR formula is now $116.5 billion, which is not inexpensive by any means but less than the $139 billion it estimated it would cost back in February. Plus it is a downright deal when compared to the $271 billion estimate the CBO put on an SGR repeal in August of 2012.

Advocates for a repeal, including the American Medical Association, point out that the SGR formula only saves money on paper. It was meant to keep Medicare sustainable by motivating physicians to control spending through tying their payments to the overall spending growth of Medicare. If Medicare spending shot up, as it did, physician payments would be cut by a corresponding amount. Under this formula, the cut to physician reimbursement for 2014 would be 23%.

However, as Congress routinely passes temporary fixes to the SGR formula, the savings only exist on paper. Both parties are therefore motivated to repeal the formula once and for all, and the drop in price adds urgency to their efforts. Should the next budget review show that spending on Medicare is starting to rise again, then the price of the SGR fix will of course go back up as well.

“Fixing the flawed Medicare payment formula is some of the most important work facing this Congress”, said Rep. Mike Burgess, MD (R-Tex), vice chair of the House Energy and Commerce Health Subcommittee, said in a statement.  “The committee’s legislation to repeal the SGR is vital to the protect the health of our seniors and ensure that our nation’s best doctors continue to see Medicare patients. I am certain that this new estimate by the CBO will accelerate the pace in passing this bill. Now is the time to repeal the broken SGR and replace it with a system that is good for both doctors and seniors.” -

H.R. 2810, the Medicare Patient Access and Quality Improvement Act of 2013 — which the House Energy and Commerce Committee passed earlier this year — would repeal the SGR and replace it with a system that would create modest (0.5%) annual increases in payments and, starting in 2019, tie those payments to physicians meeting certain as yet to be determined quality measures.

The bill could be voted on before the House officially recesses for the year, notes Congressional news site The Hill, but it may also carry over into early 2014. In previous years when an SGR fix was not passed by New Year’s Day, physicians were asked to simply hold claims until the fix could be passed.

Because H.R. 2810 contains the modest payment updates and some additional spending — along with cost controls like decision support for medical imaging that the CBO has expressed doubts about — the CBO scores the cost of the bill higher than just the SGR repeal by itself. The Office currently pegs the cost of H.R. 2810 at $153.2 billion by 2023.

Read the CBO report.