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CBO Estimates Cost of House 'Doc Fix' at $175 Billion over 10 Years

By Emily Ethridge, CQ Roll Call

September 13, 2013 -- A House Energy and Commerce bill to change how Medicare pays physicians would cost $175.5 billion over 10 years, according to the Congressional Budget Office (CBO).

The bill (HR 2810) would repeal Medicare's sustainable growth rate (SGR) and give physicians automatic payment updates of 0.5 percent over five years, which would cost $63.5 billion, the CBO said.

Beginning in 2019, physicians would either move into an enhanced fee-for-service system known as the Quality Update Incentive Program or an alternative payment model. The CBO said that the real cost depends on how those mechanisms operate, but it estimated they would increase spending by $112 billion over 2019–23.

The score defines the bill's biggest obstacle—how to offset the cost of its provisions. Bill sponsors have not yet revealed possible ways to pay for the legislation. The cost of simply repealing the SGR over 10 years is much less at $139.1 billion, according to the CBO.

The CBO said that the bill's alternative payment models generally would not save Medicare much money. First, most physicians would choose to participate in the payment model that offers the largest payments for the services they provide.

In addition, most of the alternative payment models (APM) would be in development during 2019-2013 and undergoing testing through demonstration projects. "CBO's review of numerous Medicare demonstration projects found that very few succeeded in reducing Medicare spending," the report said. In addition, most of the alternative payment models that would ultimately be adopted would increase Medicare spending, the CBO found.

"CBO expects that the use of the APM mechanism would tend to provide physicians with rewards for good performance even when there was no change in their performance relative to current law; that effect would tend to generate higher Medicare spending than under current law," the report said.

It noted that under the bill, providers would have more influence in creating the payment models than they do under the current program at the Center for Medicare and Medicaid Innovation (CMMI). That increased influence would lead to smaller savings compared with the CMMI models, the CBO said.

The office noted there is "significant uncertainty" over how many alternative payment arrangements would be offered and adopted, and how many providers would participate, among other issues.

The House Ways and Means Committee and Senate Finance Committee are currently working on their own proposals to replace the SGR and plan to reveal them this fall.

If Congress fails to act this year, doctors will have their Medicare payments cut by about 24 percent on Jan. 1, 2014, the CBO said.

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