SGR Repeal Has a New Price, Here’s How it May Be Paid For

The non-partisan Congressional Budget Office has finished crunching the numbers for the permanent repeal of the sustainable growth rate (SGR) formula negotiated by three congressional committees earlier this month and predicts that passing the bill will increase direct Federal spending by about $138 billion from 2014-2024.

So far, legislators have not officially offered proposals for how the repeal and replacement of the SGR will be paid for. However, it is safe to say that increasing revenue through new taxes is not an option. If the bill is to pass, it will need to be paid for by cuts in other government spending.

Some of the ideas out there for how to help pay for the SGR bill include:

1. Continue the sequester cuts on health care spending even further. This was a popular provision with conservatives in the debt ceiling talks as it also would continue cuts to programs that help implement the Affordable Care Act (aka, Obamacare). Ultimately, House Speaker John Boehner dropped the provision from the debt ceiling deal and had the House vote on a “clean” (no provisions attached) extension of the debt ceiling. However, the idea is still out there and has already been used in other bills, potentially pushing the end of the sequester all the way out to 2024.
2. Take some money from the Overseas Contingency funds. These are unused Iraq and Afghanistan military funds and redirecting this money to health care is popular with Democrats. However, the GOP is opposed to repurposing this money for health care and recently blocked a massive veterans benefits bill in part because it used the Overseas Contingency fund as a pay-for.
3. Administration proposed cuts to specific health care programs and services. These include ideas like expanding use of bundled payments to save money, reducing reimbursement to Critical Access Hospitals (as well as making the CAH designation more restrictive) and reducing overuse of inpatient rehabilitation facilities. However, these are by in large not grand sweeping changes but rather small cut ideas like encouraging greater use of generic drugs and tightening up restrictions on who can get a Medicare-funded power chair.
4. Create savings by reinforcing Medicare reforms. This was proposed by former CMS administrator Mark McClellan, M.D., Ph.D., in Health Affairs in February. His list included ideas like setting post-acute care payments based on need and not care setting, creating stronger incentives for hospitals to coordinate post-discharge care, equalize reimbursement for certain outpatient and ambulatory services, use competitive bidding for clinical laboratory payments, reform Medigap and Medicare benefit design, encourage efficient prescription drug use by low-income beneficiaries, and increase income-related Medicare premiums. All together, McClellan predicted that these changes would save up to $213 billion, more than enough to pay for the CBO’s predicted cost for the SGR repeal and replacement.