SGR Update: 2012 Budget Extends Current Rates for Two Years
February 16, 2012
The Fiscal 2012 budget that President Obama submitted to Congress on Monday proposes a 2 year SGR fix, for calendar years 2012 and 2013. The budget then assumes that Congress will find a permanent fix for the SGR problem beginning in 2014.
According to Administration officials, the budget would trim the deficit by $1.1 trillion over 10 years, with two-thirds of the savings coming from spending cuts and one-third from tax increases.
The President’s budget also proposes a $663 million increase, or about 17%, in CMS’ discretionary budget which reflects money needed to implement the health care reform law enacted last year, a doubling of the funding for the RAC’s (over the large increase in 2011 versus 2010), and other “puts and takes” (see table below).
The short-term cost of freezing SGR for two years is approximately $62 Billion. Â The President proposes to “pay for” this freeze by eliminating fraudulent or wasteful spending in the Medicare program, making various changes in the Medicaid program that would reduce federal outlays, impose a financial penalty on providers who do not update their Medicare enrollment information, and other activities aimed at reducing costs.
According to the budget, the long-term cost of fixing the SGR problem is estimated at $315 Billion over 10 years. The budget assumes that this will occur and that Congress will find the money to pay for this fix.  However, no specific long-term proposals for how to fix the SGR problem are put forward nor is there any proposal for how to pay for the unspecified fix.
With regard to the SGR problem, the President’s budget documents say the following:
“The Administration is committed to working with Congress to achieve permanent, fiscally responsible reform and to give physicians incentives to improve quality and efficiency, while providing them with predictable payments for the care they furnish to Medicare beneficiaries.”
Here is a chart that highlights various key proposed funding levels for CMS:
| 2010 Actual | 2011 Continuing Resolution (CR) | 2012 estimate | |
| Program operations | 2,404 | 2,689 | 3,245 |
| Federal administration | 697 | 767 | 925 |
| State survey & certification | 366 | 469 | 417 |
| Research, demonstrations | 39 | 602 | 90 |
| High-risk pool grants | 55 | 55 | 44 |
| ARRA Medicare/Medicaid HIT | 88 | 191 | 201 |
| Consumer Assistance Grants | 1 | 29 | 0 |
| Recovery audit contractors | 26 | 259 | 500 |
| CLIA | 54 | 43 | 43 |
| Data Sales | 8 | 2 | 2 |
| Coordination of Benefits | 42 | 52 | 59 |
Of course, this budget proposal is just the first step in a long journey toward an approved federal budget for 2012. The good news is that both Republicans and Democrats say they support a fix to the SGR. But budget rules require that the SGR is “offset” with other spending cuts or tax increases.
