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New CBO Estimate Again Reduces Cost of 'Doc Fix'

By Emily Ethridge, CQ Roll Call

December 6, 2013 -- The Congressional Budget Office (CBO) in a one-page memo on last week once again lowered the cost for repealing Medicare's physician payment formula, saying a 10-year repeal would cost about $23 billion less than an earlier estimate this year found.

That even-lower cost is sure to add momentum to lawmakers' efforts to repeal the formula and replace it with different payment system. According to the CBO, the cost of repealing the sustainable growth rate formula would now be $116.5 billion over 10 years — less than half of what the CBO estimated it would cost to do in 2012.

Physician groups had already been urging lawmakers to seize the opportunity to get rid of the SGR while the cost of repeal was low. An estimate earlier this year put the cost of repealing the SGR at $139.1 billion over 10 years. The most recent CBO estimate is sure to bring more hope to stakeholders that a permanent replacement can be achieved.

The Senate Finance Committee plans to mark up a replacement proposal it crafted with the House Ways and Means Committee, which may also hold its own markup next week.

The new estimate did not provide an explanation for the lowered costs.

Along with adding energy to the overall replacement effort, the estimate could also help a measure (HR 2810) approved in July by the House Energy and Commerce Committee. The CBO said that bill would cost $153.2 billion over 10 years, down from its previous estimate of $175.5 billion.

One of the biggest obstacles to passing a permanent SGR replacement has been figuring out a way to offset the cost of doing so. Lawmakers insist that any measure be fully offset, but so far have not publicly discussed possible ways to pay for it.

With time running short this year, physician groups have asked lawmakers to pass a short-term payment patch to stave off rate cuts that will occur Jan. 1, while still working on their replacement bills.

The CBO estimate notes that the Center for Medicare and Medicaid Services recently issued a final rule saying the cuts to physicians next year would be 20.1 percent. But other adjustments included in the rule will mean physician payments will effectively be cut by 23.7 percent if Congress doesn't act, the office said.

The cost of a yearlong "doc fix" that freezes provider payments for one year would be $19.6 billion over 10 years, the CBO said. Giving providers a 0.5 percent increase for 2014 would cost $18.7 billion over 10 years, the memo said. It was not clear why an increase would cost less over 10 years than a payment freeze.

American Medical Association President Ardis Hoven urged lawmakers to make the payment patch shorter than one year.

"To get a landmark bill to the finish line early next year, the AMA supports a very short term 'bridge' to stop the looming 2014 Medicare payment cut for just a couple months," Hoven said in a statement. "We cannot afford any proposal that maintains the status quo for another year on a policy that is a proven failure."

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