September 16, 2013
1 min read

Measure to fix physicians’ Medicare reimbursement formula now estimated to cost $175 billion

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The cost to replace Medicare’s existing payment formula for physicians now is estimated at $175 billion, $37 billion more than previously projected, according to the latest report from the Congressional Budget Office.

Because the current reform proposal (H.R. 2810) — passed unanimously in late July by the House Energy and Commerce Committee — does not include any details on how to pay for itself, the Congressional Budget Office (CBO) estimate is the benchmark lawmakers will use as they debate ways to save enough money elsewhere to fund a replacement for Medicare’s sustainable growth rate (SGR) formula. The CBO estimate covers anticipated direct spending from 2014 to 2023.

Under existing law, according to the CBO report, Medicare’s payment rates for physicians’ services are scheduled to drop by about 24% in January 2014. CBO projects “those payment rates will increase by small amounts in most subsequent years, but will remain below 2013 levels through the 2014-2023 period,” the report authors wrote.

The reform measure provides a “statutory update” to physicians of 0.5% annually from 2014 through 2018. That would continue for providers in 2019 and beyond, with those practicing in fee-for-service receiving an additional increase based on performance quality under a new update incentive program. Qualifying providers could earn a 1% bonus, but low-performing providers would receive a 1% payment reduction.

Before the current measure added additional spending, the CBO estimated that SGR reforms would cost $138 billion.

“The CBO expects that most of the alternative payment models that would be adopted under this legislation would increase Medicare spending,” the report authors wrote. “CBO’s review of numerous Medicare demonstration projects found that very few succeeded in reducing Medicare spending.”