House and Senate negotiators have just come to an agreement on a policy framework to repeal the unworkable Medicare Sustainable Growth Rate (SGR) formula, which annually updates Medicare payment for doctors, and replace it with a new payment program.

According to a joint press release issued today by the Senate Finance Committee and the House Ways and Means and Energy and Commerce committees, Medicare’s SGR formula would be repealed, and physicians would get a 0.5 percent update in their reimbursements for five years. The policy framework also calls for:

  • Consolidating the existing Medicare “value-based” performance programs into one program,
  • New incentives for physicians to participate in “alternative payment models” to improve quality, and
  • Greater transparency through more readily available information for doctors to improve care and for patients to make informed decisions.

In rewarding quality over quantity, the policy calls for “physician-developed clinical guidelines.” That is promising.

But Members of Congress should scrutinize the formal legislative language very closely to make sure that it indeed expands physician options, reduces the massive regulatory overhead that burdens many medical practices, and secures physicians’ control over medical practice protocols, standards, or practice guidelines. Obviously, press releases or policy frameworks on such a complex issue do not and cannot suffice for detailed analysis of the legislative text that we are now looking through.

Another issue will be fiscal responsibility. The Congressional Budget Office (CBO) earlier estimated that the 10-year cost of financing a repeal and replacement of the SGR at $116.5 billion. This policy framework will certainly exceed that amount, and it does not mention how Congress will pay for the measure.

Congress has a profound obligation to make sure that any permanent Medicare SGR reform is accompanied by permanent savings. That means structural changes to the Medicare program. No SGR replacement bill should add “one dime,” in President Obama’s own words, to the deficit—or become yet another vehicle for routine price controls (which distort the medical markets), standard administrative payment manipulations, or cost shifting one part of Medicare to another. These kinds of taxpayer-insulting budgetary tactics are often discovered too late to stop a bad bill from being signed into law.

Fiscal responsibility takes on special urgency. In a recent post for Roll Call, Ardis Dee Hoven, president of the American Medical Association, wrote, “We must not let the challenge of offsetting the cost of ending the failed SGR policy become an excuse for maintaining the status quo.”

Not necessarily. In the face of $17 trillion of debt and CBO’s recent warning that big deficits are making a comeback, America cannot afford more deficit spending, inadequate “pay-fors,” or Washington’s routine response: pass “something” now and promise to pay for it later. It is indeed time to put an end to the Medicare SGR. It is also well past time to put an end to fiscal irresponsibility.