Funding Offsets Proposed for Physician Payment Overhaul


Congressional lawmakers are currently reviewing 65 potential funding offsets for legislation that would overhaul the Medicare physician payment system.  In its present form, Medicare’s sustainable growth rate (SGR) formula calls for an annual cut in physician payments, which Congress routinely cancels (the so-called “doc fix”).  The House and Senate have both passed bills that would shift the physician fee-for-service payment model to one that would align provider payments with medical outcomes.  The proposed bills will cost between $121 billion and $150 billion over ten years, requiring lawmakers to find new savings or revenues to pay for the SGR overhaul. 

The largest proposed offset would result in an increase in basic premiums for Medicare Parts B and D, resulting in potential savings of $274 billion over 10 years.  Other proposed offsets include a limit on the tax exclusion for employer-sponsored insurance (raising $262 billion in revenue over 10 years) and requiring manufacturers to pay a minimum rebate on drugs covered under Medicare Part D for low-income beneficiaries (saving $123 billion over 10 years).  Another proposed offset would eliminate the Patient Protection and Affordable Care Act’s health insurance exchange subsidies for individuals with income over 300 percent of the Federal poverty level (saving $173 billion over 10 years).  Current SGR rates will remain in place until March 31, 2014, when lawmakers are expected to come to an agreement regarding the new legislation to replace the SGR formula.  The proposed offsets may be viewed here.

Reporter, Paige Fillingame, Houston, +1 713 615 7632,

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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