The House of Representatives voted on March 26, 2015 to pass the Medicare Access and CHIP Reauthorization Act of 2015. The Bill proposes to permanently repeal the Medicare sustainable growth rate (SGR), strengthens Medicare access by improving physician payments, reauthorizes the Children’s Health Insurance Program (CHIP), and implements other measures that target fraud and abuse as well as quality incentives. The Bill is now in the hands of the Senate, which expects to address the Bill soon after it reconvenes in mid-April. The SGR Bill received unusual bipartisan support in the House: a vote of 392 in favor to 37 opposed (last year’s corrective legislation was torpedoed with the addition of last minute political changes unrelated to the SGR).
For decades, Congress has routinely “doc fixed” (suspended) the fee schedule adjustments on a temporary basis so that physician reimbursement is not cut at the steep SGR level. Since 2000, there have been no less than 13 stopgap measures to avoid the significant reimbursement reductions required by the SGR. Nevertheless, Medicare payments still effectively decreased every year as a result of a failure to keep pace with inflation.
Under this year’s SGR formula, physicians face a decrease in Medicare reimbursement rates of approximately 21 percent beginning on April 1st. Historically, CMS has delayed claims processing until there has been an SGR fix, and it is anticipated that it will do so again this year, until the Senate has had a chance to vote on the Bill. A final vote is anticipated as of the date of this article’s publication. If implemented, the Bill would increase physician payments under the Medicare Physician Fee Schedule (MPFS) by 0.5 percent per year through 2019, halt any increase between 2020 and 2025, and then increase rates in one of two ways for 2026 and beyond. For most providers, the increase will level at 0.25 percent. For those using alternative payment models, the increase will be set at 0.75 percent.
Although repeal of SGR has long been recommended by, among others, the Trustees of the Medicare program, the Bill contains a number of other potentially more important changes. For example, the overhaul of the current physician payment system based on the SGR formula is replaced with a new system that rewards use of quality and accountability models. This is not a surprise as the quality trend is quickly replacing fee-for-service systems. Once the MPFS rates halt, bonus and incentive plans become active. The Bill offers a five percent bonus for physicians who receive at least 25 percent of their Medicare revenue from alternative payment models centered on quality by 2019, and these incentives increase in future years for physicians who meet yet-to-be-established quality criteria, utilize EHR and participate in managed care plans or certified patient centered medical homes.
The theme of the Bill is quality enhancement and payment for quality successes. For example, the Bill also adopts a Merit Based Incentive Payment System (MIPS) that consolidates the electronic health records incentive program, the Physician Quality Reporting System and the value based payment program. Under MIPS, bonuses and penalties start at four percent in 2019, increase to five percent in 2020 and seven percent in 2021, and then cap at nine percent in 2022 and beyond. Providers who use alternative payment systems would be exempt from MIPS. Performance is scored based on quality, resource use, clinical practice improvement activities and meaningful use of certified EHR technology.
Consistent with the theme of quality and risk controls but apart from repeal of the SGR, the Bill also addresses other isolated issues, in some cases increasing restrictions and in some cases relaxing them. For example, the bill tightens Medigap utilization by (i) making new Medicare beneficiaries ineligible from obtaining Medigap policies which provide coverage of the Part B deductible starting in 2020, and (ii) issuing an income-related premium adjustment for Parts B and D, effectively requiring more affluent seniors to pay higher premiums. However, the Bill relaxes the gainsharing law by imposing penalties only when there is a reduction of medically necessary services but authorizes the development of an AKS “safe harbor” for gainsharing. The gainsharing law currently imposes civil monetary penalties (CMPs) when payments are made by hospitals to “reduce or limit services” to Medicare beneficiaries.
Other major components of the bill include extending CHIP for two years, the development of incentives for States to participate in Medicare expansion, requiring Medicare administrative contractors to conduct outreach and training programs on improper billing, delaying the implementation of the two-midnight rule for the next six months (through September 2015), and requiring, in an effort to address questionable bid practices by DMEPOS suppliers, bid surety bonds and compliance with State licensure requirements for suppliers of DMEPOS (i.e., durable medical equipment, prosthetics, orthotics and supplies) as a condition of bidding.
The Bill is multi-faceted and contains far more examples of a changing health care system than the popular SGR “fix.” Although the Bill has a better chance than usual for success in the Senate, it has not yet been made into law. Nevertheless, hospital and physician providers alike would be well advised to secure and review the terms of the Bill as it reveals the emphasis on quality and population control provisions that should be anticipated for the American health care system over the next two decades—whether or not the Bill in its current form is adopted.
Postscript: Since this article was drafted, the Senate voted in favor of the permanent “doc-fix” bill, and the legislation is on its way to the President for signature. It was approved in the Senate by an overwhelming majority – 92 to 8.
Philip M. Sprinkle II is the managing partner of the Health Care Practice Group of Balch & Bingham LLP.
Natalie R. Majeed is an associate in Health Care Practice Group at Balch and Bingham LLP. She works out of the Firm’s Atlanta Office.
