WASHINGTON -- The Medicare Payment Advisory Commission (MedPAC) has voted to officially endorse a plan to repeal the sustainable growth rate (SGR) formula that establishes physician pay under Medicare and replace it with one that keeps rates steady for primary care physicians over the next decade and cuts payments to specialists.

Cost of the plan is pegged at $200 billion, and the commission laid out ways to pay for it.

The proposal will reach Congress later this month. If Congress does not act on the MedPAC plan or come up with an alternative before January 1, a 30% across-the-board cut in Medicare payments mandated by the SGR will go into effect.

MedPAC's plan, which mirrors that first unveiled in September, has four main parts:

Scrap the SGR formula

Freeze the pay of primary care physicians for a decade while reducing pay for specialists by 5.9% for three years, the freezing it for another 7 years

Come up with a replacement formula for SGR and ways to pay for it

Accelerate delivery system reform, including encouraging doctors to form accountable care organizations (ACOs)

Although the SGR formula is decried by doctors, economists, and politicians alike, the new plan would require some painful cuts for doctors and was met with strong opposition by physician groups at the meeting who argued the new plan is unfair to both specialists and primary care doctors.

The American Medical Association (AMA) was quick to react with disapproval as well.

"The AMA strongly opposes the Medicare physician payment recommendation voted on today by MedPAC," said AMA president Peter Carmel, MD, in a press release. "The commission joins many groups who have put forth proposals to repeal the broken Medicare physician payment formula. However, offsetting part of the cost of repeal through drastic cuts and long-term freezes to physicians falls far short of what is needed to preserve patients' access to care."

Beginning in 2014, said a urologist on the MedPAC panel, under the proposed plan a nurse practitioner who works in his practice will earn more than he does for "seeing the same patient, with the same code and the same risk.

"That to me is extremely disturbing," said Ronald Castellanos, MD, of Southwest Florida Urologic Associates.

Urologists have between 15,000 and 17,000 hours of training, while a nurse practitioner has between 750 and 1,500 hours, he said.

Although primary care doctors wouldn't see a pay cut under the plan, a 10-year pay freeze will amount to the same thing.

"Looking forward 10 years with no increase in fees is probably the most painful of all the recommendations," said panelist Bruce Stuart, PhD, an economist at the University of Maryland Baltimore.

"Pain" was a recurring theme at the meeting.

"There is so much pain to pass around here, and we shouldn't minimize that," said panelist William Hall, MD, a geriatrician at the University of Rochester School of Medicine.

"But it's a very solid foundation," he said of the plan.

The SGR system links physician reimbursement rates to increases in the gross domestic product (GDP). Because spending on physician services has outpaced increases in the GDP, the formula has called for cuts in reimbursement each year over most of the past decade -- and Congress has always voted to push those cuts down the road.

The scheduled 30% cut in physician reimbursement slated to take effect at the start of 2012 is a price that many think is too high to sustain physician participation in Medicare.

To pay the $200 billion price tag on SGR repeal, the panel suggested nearly $75 billion in savings from the drug industry, $46 billion from post-acute care services, $33 billion from beneficiaries, and $24 billion from hospitals.

The rest of the savings would come from laboratories, the Medicare Advantage program, and durable medical equipment costs.

Finally, MedPAC panelists said it's important to accelerate delivery system reform and recommended that Medicare work to get providers to join accountable care organizations or other practice models that incorporate bundled payments or capitation systems. Medicare should "strongly encourage providers to move towards these models and make [fee-for-service] less attractive" the group recommended.