Bill Improves Medicare Payments But Increases Deficits

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Last week the House overwhelmingly approved (392-37) a bipartisan plan to repeal Medicare’s flawed Sustainable Growth Rate (SGR) payment formula for physician services. To avoid having to fully offset the cost, however, the House waived statutory “pay-as-you-go” (PAYGO) rules.

The legislation would increase projected deficits by $141 billion over 10 years, according to the Congressional Budget Office (CBO).

The Senate is expected to consider the legislation after a two-week recess. The administration supports the bill.

“It is important to keep in mind that waiving PAYGO does not waive the cost of legislation. It simply means that the House has decided to pay for the cost with borrowed money,” said Robert L. Bixby, executive director of The Concord Coalition.

With an April 1 deadline under SGR for preventing a 21 percent cut for payments to physicians, the bill would replace the formula with small annual increases coupled with incentives to encourage value-related and outcomes-based payments.

This would be an improvement over Medicare’s traditional fee-for-service structure. It would also end the troubling practice of temporary last-minute “patches” to avoid deep payment cuts.

However, according to CBO, the change would increase projected Medicare spending by $175 billion through 2025. Other provisions would bring the 10-year total cost of the legislation to more than $200 billion. Only $70 billion of this would be offset, with the rest adding to projected deficits.

The PAYGO rules were enacted to prevent Congress from worsening the budget outlook by increasing mandatory spending programs (such as Medicare) or cutting taxes without covering the costs through changes in other spending or taxes. Waiving PAYGO undermines this purpose.

“The offsets include some positive reforms such as increased Medicare premiums for wealthier beneficiaries and a small restriction on the ability of Medigap insurance plans to cover deductibles,” Bixby said. “These have the potential to lower health care costs over the long-term but fall short of paying for the SGR repeal. Additional reforms, such as those suggested in the President’s budget, could be used to close the gap.”

External links:
Blown ‘Doc Fix’ Deadline Leaves Medicare Payments in Limbo (The Hill)

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