WASHINGTON D.C.— Senator Jay Rockefeller (D-WV), Chairman of the Health Care Subcommittee of the Senate Finance Committee, and Senator Angus King (I-ME), are asking more than 65 physician, provider, and hospital groups for their support of the Medicare Drug Savings Act which provides a path to permanently fix the Medicare Sustainable Growth Rate (SGR). These groups stand to benefit the most from a stable reimbursement system, which is why Senators Rockefeller and King have asked for their support in urging other Senators to vote to return to the pharmaceutical payment system which existed before Medicare Part D was enacted 10 years ago. 

“Year after year, it has not been how to reconfigure the Medicare payment system that has stymied progress but the failure to identify a way to pay for these changes. This year may finally be different,” Rockefeller and King wrote. “The Medicare Drug Savings Act is a sensible way to pay for replacing the SGR. It would return drug pricing for the dual eligibles to the same mechanism that was used prior to the passage of Part D and still for the Medicaid program, a mechanism that would not harm patients, doctors or hospitals in any way.  With this simple change we can finally move beyond the SGR and create needed certainty and stability for both physicians and hospitals.”

To read a sample letter, please click here and full text of the letter is below. A comprehensive list of groups the Senators contacted is available upon request.

In late October, Rockefeller recommended to his colleagues on the Senate Finance Committee that the Medicare Drug Savings Act be used to pay for the so-called “Doc fix”, as it would save $141.2 billion over ten years – a savings that could fully pay for the permanent SGR fix.

The Medicare Drug Savings Act restores discount pricing on medications for low-income patients who are dually eligible for both Medicare and Medicaid.  Even though these are among the most vulnerable patients, Congress removed their rebated pricing in 2003 when it created the Medicare drug benefit. The bill would restore those rebates, which would provide the savings needed to fix the SGR once and for all.

Through a series of patches, Congress has already spent $150 billion on the SGR problem without actually fixing it.  Rockefeller and King believe the Medicare Drug Savings Act is a path to a comprehensive and permanent fix to this issue that does not harm beneficiaries. This year, CBO estimates the cost of a permanent fix could be nearly $140 billion dollars over ten years, a much lower cost estimate than in past years. It is also less than the amount Congress has spent on consecutive short-term fixes to the problem.

While Congress could simply patch the program again, that would do nothing to create stability in the program for Medicare providers and their patients, and it would waste the opportunity presented this year by CBO’s lower cost estimate for a permanent SGR fix.   

About the SGR: 

Medicare payments for services of physicians and certain non-physician practitioners are made on the basis of a fee schedule, commonly referred to as the sustainable growth rate (SGR) system. The SGR formula was originally intended to rein in the growth in Medicare costs by setting some boundaries on physician reimbursement.  While the formula was well-intended, rising medical costs ended up triggering unpopular cuts to physicians’ Medicare payments.  Year after year, Congress patched the program and postponed these cuts.  But now, the cuts have accumulated and, unless Congress intervenes, Medicare physician payments will be reduced by 25 percent on January 1, 2014. If such a large cut were made, it is believed that physicians would leave the Medicare program. 

Full text of the letter is below:

We are writing to you regarding the Sustainable Growth rate (SGR).  While well intended, this 1997 deficit reduction effort, which set Medicare reimbursement rates using a formula tied to economic growth, “has failed to restrain volume growth and, in fact, may have exacerbated it." (Medicare Payment Advisory Commission, October 14, 2011 letter to lawmakers).

There is widespread, bipartisan agreement that the SGR is broken beyond repair and yet, year after year, a permanent fix has remained out of reach.  While there remains some difference of opinion on the details of what would replace the SGR, the general outlines are clear.  We must continue to move toward a system of payment that encourages wise treatment decisions and focuses on the quality of care provided with an eye toward improving outcomes in a cost-effective way. 

Year after year, it has not been how to reconfigure the Medicare payment system that has stymied progress but the failure to identify a way to pay for these changes.  This year may finally be different.  At $138 billion over ten years, the base cost of permanently replacing the SGR is at the lowest it has been in years.  At the same time, the cost to taxpayers of paying non-discounted drug prices for the 9.6 million Americans who rely on both Medicare and Medicaid is at an all-time high.  Just by going back to paying rebate pricing for this group (less than 20% of the full Medicare population), $141.2 billion could be saved over ten years, fully paying for the a permanent fix of the SGR.

The Medicare Drug Savings Act (S. 740,  H.R. 1588) is a sensible way to pay for replacing the SGR. It would return drug pricing for the dual eligibles to the same mechanism that was used prior to the passage of Part D and still for the Medicaid program, a mechanism that would not harm patients, doctors or hospitals in any way.  With this simple change we can finally move beyond the SGR and create needed certainty and stability for both physicians and hospitals.

This solution will not be possible without your help.  It is time for every provider that relies on Medicare to take a stand not just on the need to eliminate the SGR but on a sensible way to get it done.  If your policy committee has not yet reviewed the Medicare Drug Savings Act, we ask that you have them do so as soon as possible.  Your endorsement of this key legislation could be the difference between yet another short-term patch and a permanent solution.

Sincerely,

John D. Rockefeller IV  

Angus King

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