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With the Congressional Budget Office projecting a reduced cost for a long-term “doc fix,” Congress may seize the opportunity to end the annual adjustments to Medicare reimbursement rates. Mary Agnes Carey and CQ Roll Call’s Emily Ethridge discuss.

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MARY AGNES CAREY: Welcome to Health on the Hill. I’m Mary Agnes Carey. Amid the partisan battles over the 2010 health care law known as Obamacare, lawmakers may be close to bipartisan consensus on another health care issue – overhauling how Medicare pays physicians. Three Capitol Hill committees are discussing how to replace the “Sustainable Growth Rate” – known as the SGR. For years, Congress has passed last-minute patches to the formula to prevent Medicare physician payment cuts. And while there isn’t a unified approach or agreement on how to finance a fix, many analysts say Congress appears closer than ever to replacing the SGR. With us to discuss the latest developments is Emily Ethridge, a health care reporter for CQ Roll Call. Hi Emily.

EMILY ETHRIDGE, CQ ROLL CALL: Hi Mary Agnes.

MARY AGNES CAREY: It’s great to have you here.

EMILY ETHRIDGE: Thanks for having me.

MARY AGNES CAREY: Sure. Give us a little bit of background on the Medicare SGR. When was it created, what was its purpose, and why are people talking about repealing it?

EMILY ETHRIDGE: So this was part of the 1997 Balanced Budget Act. If you go all the way back to then, and we really thought this was a formula that would keep the payment rates for Medicare physicians more in line with the overall growth of the economy. For a few years, it worked out pretty well. For the first five years, it seemed OK. It basically puts a limit on how much physician payments can grow.

Around 2002, things started to get bad. It started calling for cuts. Every year since 2002, it has called for more and more cuts. Drastic – now I think it’s about 25 percent cuts to Medicare physicians if we let this formula take place. However, Congress hasn’t let it actually take place in the past 10 years. They keep doing these short-term patches, which is what everyone knows as the “doc fix.” That makes it actually more expensive every time they don’t let the cuts happen, they give physicians instead this tiny little raise and that means that every year the formula calls for deeper and deeper cuts.

MARY AGNES CAREY: So, as we know, before the August break, the House Energy and Commerce Committee passed a bill to repeal and replace the SGR. How would that measure work and how would they pay for it?

EMILY ETHRIDGE:  We don’t know how they’ll pay for it and that is the biggest sticking point right now. That is going to be the thing that really makes or breaks whether this bill happens. Because it’s a pretty big price tag. Only repealing the SGR – just taking away the SGR for 10 years – is about $140 billion. That’s doing that without doing anything else you might want to do. Any other kind of payment models, any other Medicare reforms you might want to try to make. So we’re looking at a pretty big price tag on this bill and right now we have no idea how they make up for that cost.

But the Energy and Commerce bill, it would get rid of the SGR which is a huge goal for everybody. Then we would have a little transition period of five years, where they would just set small payment updates for all Medicare physicians. Then after that, physicians would be able to move into these alternative payment models.  The idea here is to get away from the “fee-for-service” Medicare that most stakeholders and health care economists really hate.

MARY AGNES CAREY: That’s traditional Medicare.

EMILY ETHRIDGE: That’s traditional Medicare, that’s what we have now, fee-for-service. You perform a service, Medicare pays the doctor. People say it encourages volume of services over really good quality care. So they would try to put in these new models, under the Energy and Commerce bill, to get away from that and start rewarding the quality of care. Or having better outcomes while saving money for Medicare overall.

MARY AGNES CAREY: And also, there are other committees. In the House, we have the Ways and Means Committee working on the issue. In the Senate, it’s the Finance Committee. Do we know enough now to tell how those approaches might be different from each other and from what Energy and Commerce has done?

EMILY ETHRIDGE: Everyone says Energy and Commerce has a pretty good base of a bill and they like it. However, those other committees don’t like it enough to say that we’re just going to take that up, maybe make a few tweaks here and there and send it along on its way, which would be the fastest option. They seem to each have more, bigger changes in mind. Everyone really wants to put their own stamp on this bill. So I feel like we’re going to get similar-looking bills but not the exact same bill from all three committees.

MARY AGNES CAREY: Now as we both know — you and I have reported on this for years — the SGR has been with us for a long time. What’s the reason for all this momentum right now, and is this Congress really going to act to make a change?

EMILY ETHRIDGE: As you said this is really the closest we’ve ever gotten to having the SGR go away. The Energy and Commerce Committee marking up a bill and approving it unanimously – 51 to 0 – so it’s bipartisan support to get rid of this – is farther than we’ve ever come in the history of the SGR. The reason that really put the momentum behind this is, yes, Congress has been working on this for a long time, but earlier this year we got a very favorable score from the CBO, that $140 billion I mentioned earlier. That’s the lowest score, the lowest price tag for getting rid of the SGR that we’ve ever seen, really, in the past, I’d say, five years. So everyone said basically it’s a fire sale on the SGR. Let’s go for it and strike while the iron’s hot. Get rid of this before CBO changes its mind.

MARY AGNES CAREY: While it’s only $140 billion in Washington language it still is a $140 billion. So what are the likely ways for financing? What are the options?

EMILY ETHRIDGE: Traditionally, when they do these small patches they take money out of Medicare somewhere else. They find other ways to cut provider payments elsewhere, maybe cut specialty doctors instead of physicians, or hospitals. They look to Medicare to try to move money from one pile to another. That could definitely happen here, although again $140 billion, plus more most likely, is a big ask. Republicans would love to cut that money from the health care law, from the overhaul, I don’t really think Democrats will be on board with that, but maybe if they could get some of it from it from the health care law, that might be part of a bigger compromise that could happen.

There’s also a lot of talk about tax reform — tax code overhaul – in some of these committees right now, in Ways & Means and Finance. So it’s possible they might find some things in the tax code that produce savings, and they might just tack that on to pay for it instead.

MARY AGNES CAREY:  Speaking of the health care law, we know the House Republicans voted several times to defund all or part of that measure. Are we going to see more of those votes this fall?

EMILY ETHRIDGE:  I definitely expect to see more votes in the House on repealing or trying to de-fund the health care law. Right now you have a big group of Republicans who want to de-fund the law – stop it all together – and are willing to put some things at risk to get that to happen.

You don’t have House leadership on board with that yet, and we really haven’t reached a critical mass of those Republicans who want to de-fund the law yet. It’s about a third of the House Republican caucus. So it remains to be seen whether we actually will see that vote this month or possibly next month. But it’s something they’re really working on. And I think if they don’t get that de-fund vote, they’ll get some other repeal votes or delay votes just to keep everybody satisfied.

MARY AGNES CAREY:  And I think you’re talking here in the sense of de-funding as part of the continuing resolution to fund the government, correct?

EMILY ETHRIDGE:  Right. Exactly.

MARY AGNES CAREY:  So if that one doesn’t occur, you may see some more of these rifle shots to de-fund pieces of the ACA.

EMILY ETHRIDGE:  Especially when we have a debt ceiling fight again in October, this could certainly come up as part of that.

MARY AGNES CAREY:  Thanks so much, Emily Ethridge of CQ Roll Call.

EMILY ETHRIDGE:  You’re welcome, thank you.

This was produced by Kaiser Health News with support from .