Congress Passes Historic Medicare Reform

Bipartisan Bill Headed to President’s Desk for Signature

(The content of this post is from a letter received from McKesson on April 15, 2015 as a McKesson Public Affairs ALERT.)

congress passes historic medicare reform HR2

Yesterday, the U.S. Senate overwhelmingly passed H.R. 2 which reforms the Medicare physician payment system, helps slow healthcare cost growth, and extends healthcare coverage for children. The measure also passed the House by a bipartisan vote of 392 to 37. The President plans to sign the bill.

The passage of these critical reforms is both substantively and politically important.  The measure avoids the threat of draconian cuts to Medicare providers. Politically, the bipartisan negotiating process and the overwhelmingly bipartisan vote show that in the newly controlled Republican Congress both parties can work together to get things done.

McKesson has advocated for these Medicare reforms in recent years and strongly supports this measure as it will have a positive impact on our physician customers and business partners.

What is the Sustainable Growth Rate (SGR)?

Medicare payments to physicians are determined under a formula, commonly referred to as the “Sustainable Growth Rate” (SGR).  SGR was first passed into law in 1997 and intended to control physician spending by linking it to the nation’s economic growth.  The formula has called for reductions in physician payment rates since 2002, but Congress has spent nearly $150 billion in 17 short term patches to avoid the cuts.  The most recent patch was to expire on March 31st.  If Congress hadn’t acted, providers would have received a 21% reimbursement rate cut in April.

For several years, a bipartisan group of legislators had been working to permanently reform the SGR formula, but an agreement had proved politically elusive.  However, a few weeks ago, Speaker Boehner and Democratic Leader Pelosi announced they had reached a deal.

What Does the Bill Do?

The Medicare Access and CHIP Reauthorization Act (H.R. 2) returns certainty to Medicare reimbursement, incentivizes quality and value, slows the growth of health care spending, and extends health coverage for children.  Specifically, the bill:

  • Reforms the Medicare physician payment system by providing a 0.5% annual increase for Medicare providers for the next four years;
  • Transitions to an incentive-based payment system in 2019 with potential for increased payment rates for providers participating in alternative payment models based on patient outcomes;
  • Requires Electronic Health Records (EHRs) to be interoperable by 2018 and prohibits providers from deliberately blocking information sharing with other EHR vendor products;
  • Extends funding for the Children’s Health Insurance Program (CHIP) and Community Health Centers for an additional two years, and
  • Extends for six months a moratorium on enforcement of the “two-midnight” rule for short inpatient hospital stays.

What Does This Mean for McKesson Customers?

The guaranteed payment increase over the next four years will introduce mid-term stability and predictability for Medicare providers before they are transitioned to a new value-based system. The bill also supports providers as they navigate participation in alternative payment models, with the potential for increased reimbursement rates.

Though hospitals, nursing homes and rehabilitation centers will only see a base pay increase of 1% in 2018, about half of the increase without passage of the legislation, they largely backed the bill. In a letter, the American Hospital Association commended Congress for delaying cuts to the Medicaid Disproportionate Share Hospital program an additional year, until 2018, and extending the partial enforcement delay on Medicare’s “two-midnight” policy for an additional 6 months.

This bill is also good news for hospitals, clinics, and providers who treat children enrolled in the CHIP program; without the two year extension, approximately two million children would lose access to healthcare, and more than eight million children could lose access to specialty care.

Finally, the bill requires EHRs to be interoperable by 2018 and prohibits providers from deliberately blocking information sharing with other EHR vendor products.  It also leverages EHRs for quality reporting and requires the exchange of healthcare information to manage patient care across care settings.

For More Information

To read more about this legislation, see the official House Energy and Commerce Committee detailed summary here.