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Permanent 'Doc Fix' May Be Threatened by House Proposal

By Emily Ethridge, CQ Roll Call

March 6, 2014 -- House GOP leaders may offset a bipartisan bill to change how Medicare pays physicians with a delay of the health care law's individual mandate penalties, forcing Democrats to take a difficult vote next week.

The move could also kill—at least for now— the hopes of many that Congress would find a permanent solution to the much-hated sustainable growth rate (SGR) and move Medicare towards an improved payment system that rewards quality over volume.

Rep. K. Michael Conaway, R-Texas, announced the vote during a colloquy last week, saying the bill would be completely paid for, but that the offsets were still under discussion.

"The specifics of the pay-for have not yet been finalized. There are lots of things that are under consideration," said Conaway.

House Minority Whip Steny H. Hoyer asked whether the offset could involve delaying the law's (PL 111-148, PL 111-152) individual mandate penalties, noting that doing so would lead to its likely opposition in the Democratic-led Senate.

"If we use that as a pay-for, it seems to me it puts at risk" finishing the bill before March 31, when physicians would next have their payment rates cut, said Hoyer, D-Md. On April 1, the current three-month "doc fix" (PL 113-67) expires and physicians would see their rates cut by 24 percent.

That offset could be a dealbreaker for the legislation (HR 4015, S 2000) that represents a year's worth of work and compromise among three committees—Senate Finance, House Energy and Commerce, and House Ways and Means.

According to the Congressional Budget Office, the bill would cost $138.4 billion for 2014 through 2024 to replace Medicare's SGR and replace it with new payment systems.

Only 27 House Democrats voted this week for a bill (HR 4118) that would eliminate the individual mandate penalties for 2014, and the White House threatened a veto of that measure.

To offset the cost of the SGR replacement bill, the penalty delay would have to be much longer than one year or be combined with other offsets. The Congressional Budget Office (CBO) estimated the one-year delay would result in about $9.4 billion in savings over 11 years because of projected changes in insurance coverage under the bill. A GOP leadership aide said aides felt confident the offset would manage to cover the bill's cost over 10 years.

In 2011, the CBO found that repealing the individual mandate would save $282 billion from 2012-2021, mostly by reducing the government's payments for subsidized insurance through Medicaid and the law's insurance exchanges.

"The loss of revenues from eliminating the individual mandate penalty would increase the deficit; but the estimated savings from reduced subsidies are greater," the CBO said. The CBO also said that repealing the mandate would increase the number of the uninsured from about 23 million nonelderly residents in 2021 to 39 million.

Although the House has a good chance of passing the bill, the Senate Democratic leadership is likely to strongly resist any effort to delay the law's penalties. The Senate could choose to bring its version of the bill to the floor with a different offset, but the time for lawmakers to find some compromise offset is running out.

Rep. John Fleming, R-La., said if the replacement bill fails, he expects leadership to have another short-term doc fix bill "in their pocket" that lawmakers can vote on to avert those cuts.

But another short-term patch would come as a huge blow to the many provider groups who have lined up in support of the legislation.

Before Cantor made the announcement, members of both parties said they were preparing for an "ugly" offset. Republicans were wary of cuts to nursing homes and hospitals, saying leadership had said the cuts would have to come from savings in the health care industry.

"I am not going to shut down nursing homes and hospitals in my district to accomplish this," said Fleming, adding, "If we're barely propping up one side of health care doctors by completely destroying another part of health care, I don't see that as any real gain."

Rep. Jim McDermott, D-Wash., said he would not be surprised to see some kind of budget "gimmickry" in order to pay for the bill.

"I assume they're gonna pay for it with something unattractive, but I don't know what it would be," he said.

Rep. Phil Roe, R-Tenn., said earlier this week that even if the House manages to pass the bill, the Senate may not be able to do the same. He said senators could look at whatever is chosen as the offset and say it is not the right one.

"I don't think the will is there," Roe said of the Senate.

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