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Ways and Means 'Doc Fix' Carries 10-Year Price Tag of $121 Billion, CBO Says

By Emily Ethridge, CQ Roll Call

January 24, 2014 -- The House Ways and Means Committee bill to replace Medicare's physician payment formula is the cheapest of three versions, with a price tag of $121.1 billion over 10 years, the Congressional Budget Office (CBO) recently reported.

The comparatively low cost will please provider groups who have been cheering lawmakers' recent progress in moving "doc fix" legislation to replace the sustainable growth rate formula (SGR). Three committees have approved bills to institute new payment formulas, and doctors want Congress to pass one of them in the first quarter of 2014.

In December, Congress passed a three-month payment patch (PL 113-67), staving off scheduled cuts in physicians' payments under the SGR until March 31. Lawmakers have not yet scheduled bringing any of the replacement bills to the House or Senate floor.

Cost is the biggest remaining obstacle in replacing the SGR, and lawmakers are still looking for ways to pay for the bills. The Ways and Means version of the bill (HR 2810) has the lowest cost, at $121.1 billion over 10 years, while the House Energy and Commerce Committee version of the measure would cost $153.2 billion over that time period.

A bill (S 1871) approved by the Senate Finance Committee would cost $148.6 billion over 10 years, according to the CBO. The CBO said the Ways and Means bill is cheaper than the Energy and Commerce measure because it includes lower annual updates to payment rates for physicians, and has lower costs associated with its Alternative Payment Model (APM) program.

Nearly all of the Ways and Means bill's costs come from its payment increases to physicians, the CBO said. The bill would increase payment rates for Medicare physicians by 0.5 percent in 2015 and another 0.5 percent in 2016. Payment rates would stay at the 2016 level through 2023. Those updates would increase spending by $118.4 billion between 2014 and 2023, according to the CBO.

The bill would create a value-based performance incentive program and an APM program, for physicians to get better payment adjustments. The CBO found that establishing those programs would increase spending by $5.5 billion through 2023.

"That estimate largely reflects CBO's expectation that each provider will choose the program that is most attractive financially to that provider," the CBO said.

In the value-based performance program, providers would get either bonuses or negative payment adjustments depending on how they performed. Those adjustments are designed to be offset across the pool of providers, so there is no net effect on overall payments.

Providers who participate in eligible APMs would receive a lump sum incentive payment equal to 5 percent of their Medicare payments from the previous year, from 2017 through 2022.

After 2023, Medicare would have two payment rates for services. Providers in the VBP program would get a 1 percent annual increase in payment rates, while providers in the APM program would get a 2 percent annual increase.

The CBO said the bill also has savings provisions, including requiring the development of Medicare payment codes to encourage care coordination and medical-home use. Those provisions would result in $2.8 billion in savings over 10 years, the CBO found.

The CBO estimate assumed that the Ways and Means bill, if passed, would maintain current payment rates for physicians through the rest of 2014.

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