SGR Update (July 2011)
July 6, 2011 – On June 28, Senators Joseph Lieberman (I-Conn) and Tom Coburn, MD (R-Okla) released a Medicare proposal offering a three-year “fix” for the SGR formula that determines physician reimbursement. The Senators claim their bill will save Medicare $600 billion over 10 years by shifting costs to Medicare beneficiaries and increasing the Medicare eligibility age to 67 for persons born in 1949 or later.
The proposal states this fix would allow time for a new reimbursement system to be developed. The Congressional Budget Office estimates that extending the SGR for three years would cost $37.7 billion.
Some of the provisions of the proposal:
- Combine deductibles for Medicare Part A and B into a single annual deductible of $550 stating it makes it easier for seniors to use Medicare while directly addressing overutilization.
- Out-Of-Pocket maximum of $7,500. There is no cap now and this would protect Medicare beneficiaries from financial hardship or bankruptcy in the case of a major illness. Higher income beneficiaries would be subject to higher maximums, up to $22,500 depending on income.
- Higher Part D premiums
- Limiting Medigap policies from paying any of the first $550 of beneficiaries’ deductible and would limit coverage to half of the remaining coinsurance up to the $7,500 out-of-pocket limit. The Senators stated that beneficiaries with secondary insurance use up to 25% more services than those without Medigap coverage, even though the added services don’t necessarily lead to better outcomes.
- Phase out Medicare payments for bad hospital debt
On June 27, the AMA and 112 state medical and specialty societies sent a letter to the Administration and congressional leaders supporting reform of the Medicare payment formula and urging that any federal deficit-reduction plan include reworking of the SGR. It is estimated that averting currently scheduled cuts would cost nearly $300 billion over the next ten years.
The AMA supports repealing the SGR formula, implementing a five-year period of stable Medicare physician payments, and testing demonstration and pilot projects that could form the basis for a new Medicare physician payment system.
