The bipartisan leadership of the House Ways and Means Committee, House Energy and Commerce Committee, and Senate Finance Committee have announced an agreement to finally repeal and replace the problematic Medicare Sustained Growth Rate (SGR) payment formula for physicians under Medicare. For the past 11 years, Congress has deferred the application of the SGR formula (first created in 1997), which would now result in a 27% rate decrease for physicians under Medicare. The agreement provides physicians an 0.5% rate increase for each of the next five years, and then conditions future rate increases on meeting requirements of “alternate payment models” or being a patient-centered medical home. The agreement does not specify any “offsets”, or how the new payments will be paid for, since they will raise Medicare spending, at least in the short-term. The agreement also fails to address the issue of what happens to the Medicare program “extenders”, other Medicare programs such that pay for certain therapy and ambulance services, provide additional funding to rural hospitals, and fund programs that provide Medicare beneficiary education about and assistance with their Medicare benefits. These extenders were funded as part of each year’s deferrals of the application of the SGR formula.

Commentators have noted that the release of the agreement was timed for today’s Senate confirmation of Senator Max Baucus, chairperson of the Senate Finance Committee, as U.S. Ambassador to China. Senator Baucus had expressed his desire to secure the agreement to finally repeal and replace the SGR before he left the Senate.

Legislation containing the elements of what is included in the agreement announced today had been passed the Senate Finance Committee (S.1871) and had passed the House Energy and Commerce Committee (H.R.2810). It is not yet clear how today’s agreement will now be incorporated into those bills towards votes by both the full Senate and House of Representatives.

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