Congressional Committees Announce Bipartisan Deal on Medicare Payment Formula

The leaders of three congressional committees have unveiled bipartisan legislation that would repeal the current Medicare physician formula, known as the Sustainable Growth Rate (SGR). 

The legislation, H.R. 4015, would replace the formula with a new incentive program in 2018 that provides bonuses and penalties, based on whether physicians meet certain performance thresholds.

The legislation addresses only the elimination of the payment formula.  It does not say how the program will be financed, and the Congressional Budget Office has not yet provided an estimate for its cost. The CBO’s estimates for three prior proposals, which include many of these elements, ranged from $121 billion to $153 billion.

Here are some of the main provisions:

  • The SGR would be repealed immediately.
  • Positive annual payment updates of 0.5 percent would be provided for five years.
  • The Value-Based Payment Program (VBP) has been replaced with a similar Merit-Based Incentive Payment System or MIPS, which includes prospectively-set performance thresholds and offers flexibility in the imposition of performance requirements that are inappropriate for some specialties.
  • The effective date of the MIPS program would be one year later than the original VBP proposal, and will start in 2018.
  • The MIPS funding pool was increased and is no longer budget neutral, and the phase-in of penalty risks for those who fall in the lowest performance quartile has been capped at a maximum of 9 percent (as opposed to the previously proposed 12 percent).
  • The 5 percent added incentive payment for physicians in Alternative Payment Models was retained
  • Funding for technical assistance to small practices of 15 or fewer professionals was doubled.
  • Provisions similar to the Standards of Care Protection Act are included.
  • Physicians who opt out of Medicare to engage in private contracting with their patients would no longer be required to renew their opt-out status every two years.

Download a section-by-section summary of HR 4015. (.pdf, 12 pages)

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