The SGR repeal: How bad politics ruined sound policy

On April 1, President Barack Obama signed The Protecting Access to Medicare Act, P.L. 113-93, which contained yet another “doc fix,” or a one-year, short-term patch to the Medicare sustainable growth rate (SGR) formula, which the Centers for Medicare & Medicaid (CMS) uses to calculate physician payments and control health care spending.1 Gone was the potential to permanently repeal the SGR; partisan, election-year politics proved too difficult to overcome. The patch averts a 24.1 percent Medicare physician payment cut that was scheduled to take effect on April 1, 2014, and expires March 31, 2015. The American College of Surgeons (ACS) and most other national surgical and physician organizations have always opposed short-term patches and favored true, sustainable reform.

In addition to postponing the payment cut, the legislation comprises several other notable provisions, including the following:

  • A 0.5 percent positive update to Medicare payments through December 31, 2014; rates are then frozen until March 31, 2015
  • Delayed implementation of the 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD-10), from October 1, 2014, to October 1, 2015
  • A call for CMS to address misvalued physician service codes in 2017 through 2020 to produce approximately $4 billion in savings, which is about 25 percent of the cost of the short-term patch

The College’s immediate reaction to the proposed legislation was a strong rebuke and an all-out push to defeat the bill—the last highlighted provision means physicians, for the first time, will be forced to cover some of the costs of the patch. Because of the efforts of the College and other national and state physician organizations, the leadership in the House of Representatives was forced to delay a vote on the bill due to substantial opposition among the Republican and Democratic rank and file.

Behind-the-scenes political maneuverings by the House leadership, however, led to the bill’s passage. The House leadership—
Republican and Democratic—agreed to pass the legislation via voice vote and not a recorded vote. Voice votes are usually only executed on noncontroversial bills; yet in 20 seconds, the House passed the contentious short-term patch on March 28. The Senate followed suit, passing companion legislation on March 31.

Congress has now spent nearly $170 billion on 17 short-term patches over the last decade, a price tag well above the current estimated cost to permanently repeal the SGR.

Missed opportunity

Perhaps the most troubling aspect of Congress’ decision to pass the temporary patch is that it delays action on legislation that offers a long-term solution to the problems associated with the SGR. On February 6, Congress reached a bipartisan, bicameral agreement on how to repeal the SGR and reform of the Medicare physician payment system. The SGR Repeal and Medicare Provider Payment Modernization Act of 2014 (the SGR Repeal Act), S. 2000/H.R. 4015, is the product of a yearlong, collaborative effort between Congress and key stakeholders, including the College.2 The ACS issued a letter voicing its strong support of the legislation and pushed for the bill’s passage as a means to permanently rid the Medicare physician payment system of the flawed SGR.3

Good policy then met with Washington politics, and invocation of inside-the-Beltway jargon and practices like “paygo,” the “Hastert rule,” and “filibuster” took place. Paygo, a shortened form of “pay-as-you-go,” is a budget rule requiring that any spending increase be paid for by a cut in mandatory spending. The Hastert Rule—named after its architect, former Speaker of the House Dennis Hastert (R-IL)—is also known as the “majority of the majority” rule, an informal governing principle used by Republicans that holds that the Speaker of the House will not allow a vote on a bill unless most of the majority party supports the bill. A filibuster is a term for any attempt to block or delay Senate action on a bill by debating it at length, offering numerous procedural motions, or engaging in other obstructive actions. At least 60 votes are necessary to end a filibuster and move to debate on the actual legislation.

For the SGR Repeal Act, under the paygo rule, Congress had to identify more than $140 billion in cuts, likely from other Medicare providers—hospitals, pharmaceutical and medical device companies, and nursing homes—or other parts of the Medicare program to pay for the SGR Repeal Act. Unfortunately, Congress is split along partisan lines, and the Republican House and Democratic Senate were unable to agree on offsets to pay for the SGR Repeal Act. Instead, leadership in each chamber elected to use partisan offsets for the legislation, guaranteeing that neither bill would pass in the other chamber.

On March 14, the House passed H.R. 4015 by a 238–181 vote, with 12 Democrats joining Republicans in voting for a bill offset by a five-year delay in the implementation of the individual mandate. The individual mandate satisfied both the paygo and Hastert rules but was a complete non-starter in the Senate. In response, the Senate Democrats introduced S. 2110, which is the same as S. 2000 except it added other unrelated health care provisions. The Senate attempted to either waive the paygo rule and not offset SGR repeal, or use Overseas Contingency Operating funds as an offset. Neither strategy garnered the 60 votes necessary to defeat any filibuster and pass the bill in the Senate.

At the core of the inside politicking were the looming 2014 mid-term elections. At press time, Republicans were expected to expand their House majority and had better than even odds of capturing control of the Senate this year. With congressional control in the balance, neither the Republican nor the Democratic leadership wanted to have vulnerable members cast controversial votes that could be used against them in November. Likewise, neither party wanted to fall into disfavor with the stakeholders who were the likely targets for the spending cuts necessary to pay for the SGR Repeal Act, making it extremely difficult to craft a fully offset bill. Nor did either party want to threaten their at-risk members or dispense with party principles by voting to add $140 billion-plus to the nation’s deficit, making it unlikely that a bill without financial offsets would pass. To achieve SGR repeal, Congress needs to find the will to move beyond politics and focus on policy.

A closer look at the SGR Repeal Act

For more than a decade, an outdated SGR formula has repeatedly threatened patient access to care with drastic Medicare provider cuts. Therefore, despite the political setbacks that occurred this spring, the College and other members of the physician community remain committed to achieving passage of the SGR Repeal Act. Physicians kept their promise and united around sound policy reforms that will help build a more sustainable, fair, and efficient Medicare physician payment system. The SGR Repeal Act will help create a learning-based health care system focused on continually improving patient outcomes. These reforms will stabilize the Medicare program and transition the payment system to one in which health care professionals are reimbursed based on the quality and value of the care provided rather than the quantity of procedures, services, or tests ordered.

The ACS played an instrumental role in the composition of the final bill by strongly opposing bad policy and lobbying for necessary changes to the legislation. Specific policies that the College addressed in its advocacy efforts include:

  • The inclusion of an annual positive payment update from 2014 to 2018, when the alternative offered was a 10-year freeze.
  • The removal of a proposed tiered/tournament model of redistributing payments under which positive bonus payments to higher-performing physicians would have to be equally offset by cuts to lower-performing physicians. In its place is an incentive program based on physicians achieving a threshold or benchmark, making it possible for all providers to attain positive incentive payments.
  • The removal of a provision (and its accompanying 10 percent penalty for noncompliance) that directly targeted surgical service codes under the perception that the global payment for surgical procedures is overvalued and overpays surgeons.
  • The inclusion of appropriate pathways for surgeons to develop, test, and participate in alternative payment models, such as the Clinical Affinity Groups proposed in the ACS Value-Based Update plan, and to take advantage of the positive, incentive-based program.4

The SGR Repeal Act has its imperfections; however, it does provide a path for the College to advocate from a position of strength in the future and not one of financial weakness. For more information on the policy contained in the SGR Repeal Act, refer to the College’s SGR frequently asked questions document.

Post-election efforts: One last shot at repeal

The fight for passage of the SGR Repeal and Medicare Provider Payment Modernization Act—a bill that would benefit America’s seniors, and offers a long-term solution to stabilizing the SGR—continues as of press time. On the evening the patch was enacted, Rep. Michael Burgess, MD, (R-TX), the lead sponsor of H.R. 4015 and Vice-Chairman of the Energy and Commerce Subcommittee on Health, addressed the ACS 2014 Leadership & Advocacy Summit attendees and vowed to continue to seek passage of the SGR Repeal Act. He stated, “This is not the end of my efforts. I will continue to work on this issue. We are farther than we’ve ever been toward repealing and replacing the SGR.” In addition, Senate Finance Committee Chairman Ron Wyden (D-OR) stated that he will continue his efforts to pass permanent SGR repeal this year.
There is a lesson to be learned here—politics matter. Surgeons must be willing to use the profession’s political power to leverage policy and hold members of Congress accountable.


  1. H.R. 4302: The Protecting Access to Medicare Act of 2014. (113th). Available at: Accessed April 8, 2014.
  2. The SGR Repeal and Medicare Provider Payment Modernization Act of 2014. H.R. 4015 (113th). Available at: Accessed April 8, 2014.
  3. American College of Surgeons. SGR opposition letter to Congress. Available at: Accessed April 8, 2014.
  4. American College of Surgeons. Value-Based Update proposal. In: Statement of the American College of Surgeons, Presented by Frank Opelka, MD, FACS, before the Senate Finance, Committee, United States Senate, Re: Medicare Physician Payments: Perspectives from Physicians, July 11, 2012. Available at: Accessed April 8, 2014.

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