A Boehner-Pelosi prescription for Medicare doc fixes

In a rare display of bipartisanship, House leaders are actively pursuing a deal to permanently change the way Medicare pays doctors and to extend a children’s health program for two years.

The estimated $200 billion package could be introduced as soon as this week by House committees responsible for health care policy. Both Speaker John Boehner (R-Ohio) and Democratic Leader Nancy Pelosi (D-Calif.) are personally involved to the point that Pelosi reached out to Senate Minority Leader Harry Reid (D-Nev.), and Boehner has spoken to Senate Majority Leader Mitch McConnell in recent days.


Pelosi was to brief her leadership Monday evening, and Boehner was expected to address the ongoing talks before his party conference Tuesday morning.

Major hurdles remain, but the politics are intriguing given the very partisan character of the House. Both Boehner and Pelosi appear willing to take some risks to solve what has been a thorn in both parties’ sides for years. And unlike the Homeland Security debate this winter, the speaker is being bolder about building a bipartisan coalition to defuse a crisis — rather than waiting until it has engulfed him in the final hours.

While details are still being ironed out, the basic contours are clear: The plan would permanently eliminate the Sustainable Growth Rate, the outdated formula that calls for frequent and deep cuts to Medicare providers, and replace it with a new payment system. This is a priority for both parties to end the need for frequent “doc fixes.”

The plan would also extend funding for two years for the Children’s Health Insurance Program, which is set to expire in September. Instead, it would continue at the elevated payment rates approved under Obamacare.

Even if the House approves the bill, the Senate could be a problem, and Reid made no commitment to Pelosi in their conversation. But he said he would present the legislation to his caucus if she and Boehner can get it through the House — leaving open the possibility for compromise.

The deal would be only partially paid for in the first decade — an issue that is almost certain to be a sticking point for some conservatives. Lawmakers would pay for $70 billion of the total package, with most of the savings at the back end of the 10-year budget window. Republicans will argue that the Medicare structural reforms included will generate deeper savings in the second 10-year window.

About half of that $70 billion would come from cuts to health care providers, such as hospitals, acute-care providers and insurers. Most of the cuts are not expected to take place immediately.

The other half would be covered through cuts to Medicare beneficiaries, such as additional means testing for high-income seniors. Those beneficiary reductions are likely to be a problem for some Democrats who have long resisted any cuts that would hit seniors on Medicare.

As of Monday evening, that added means testing was expected to increase premiums for single seniors making more than $133,000 and married couples making more than $266,000. They would be expected to pay 65 percent of their costs, up from 50 percent, according to persons familiar with the talks. Seniors reporting income more than $160,000 as a single person or $320,000 as a married couple would see their premium share rise from 65 percent of cost to 80 percent.

The plan would also permanently extend a program helping those between 120 percent and 135 percent of poverty to pay their Part B premium for physician care.

AARP has “very serious concerns” about the means testing and Medigap changes, according to Ariel Gonzalez, its director of federal health and family advocacy. Although the organization is not yet opposing a bill for which legislative language has not been released, it is “expressing concerns to leadership and key folks within the House that these are just cost shifts to beneficiaries,” Gonzalez said.

The plan comes two weeks ahead of the expiration of the current “doc fix.” Without another short-term remedy or the passage of a replacement plan, physicians would see a 21 percent cut in payments on April 1.

Lawmakers on both sides of the aisle have long bemoaned the Sustainable Growth Rate, which has required 17 patches to prevent steep cuts to providers over 14 years. Last year, the top Republicans and Democrats on the House and Senate health committees agreed on a basic replacement policy, which is expected to be included in the bill introduced this week. But they couldn’t come together on how to pay for it.

From a policy standpoint, much rests on the willingness of Republicans to accept short-term costs in return for the long-term structural changes they have repeatedly sought in Medicare. Without a doubt, there will be a sizable gap in the first 10 years scored by the Congressional Budget Office. Yet the CBO is also expected to deliver a letter this week on what savings could be realized beyond 2025, and the leadership is hoping that will give them precious leverage to sell the deal to the rank and file.

And the upcoming budget debate offers an opportunity to do even more in the short term. The Republican budget, to be reported Wednesday, will assume savings from Medicaid. One option is to allow a floor amendment adding more savings from that program for the purpose of covering the cost of the SGR bill.

On the Democratic side, anything that affects Medicare beneficiaries can be dicey. But getting a permanent SGR solution would be a big win for Democrats since the continued uncertainty now only hurts seniors by threatening to push more physicians out of Medicare. Plus the plan as currently crafted would also get CHIP extended through the end of Barack Obama’s presidency.

The emerging deal comes against the backdrop of the Supreme Court’s expected ruling in June on King v. Burwell, which could upend the tax subsidies in Obamacare. Dealing with the CHIP reauthorization now would ensure that the bipartisan children’s program doesn’t get entangled in Obamacare negotiations if the White House loses the legal case.

The plan was hatched in the House, which has generally led the Medicare payment discussions since last year. Its future in the Senate is uncertain.

Senate Democratic aides said Sunday that they’re concerned about the proposed cuts to Medicare beneficiaries and the reauthorization of CHIP for two years rather than four. They’re also worried about the bill getting jammed through the Senate ahead of the March 31 deadline.

Democrats have “some concerns about where this deal is headed both procedurally and substantively,” a senior Democratic aide said, adding that the Senate had not yet seen the policy details on paper.

It’s unclear whether Senate Democrats would come around to the shorter CHIP extension.

Outside groups will surely become a factor, too. Heritage Action for America, which is courting the right in the GOP, said last week that it opposes any Medicare payment reform plan that isn’t paid for.

In fact, Heritage has supported the same type of Medicare structural reforms in the past — making its latest stance doubly frustrating for the Republican leadership. Spokesman Dan Holler said the organization has been consistent in demanding not just reforms but reforms on a scale in which they can fully offset any plan to do away with SGR.

“Unlike some of the folks advocating for the rumored deal, we’ve been consistent in demanding that any repeal of SGR must be offset in its entirety,” Holler said. “Structural reforms should be used to that end, not to pay for merely a portion of the new spending .”

But others are more supportive.

Americans for Tax Reform has come out strongly in favor of the emerging deal, with President Grover Norquist saying that any short-term deficit hit is a small price to pay for structural changes that will generate big savings down the road. Norquist said he expects conservative groups to back the deal.

The plan “as explained to us is a good idea,” Norquist told POLITICO. “It saves money for taxpayers over time, and it gets rid of this game every few years of making spending cuts that pretend” to save money.

The replacement policy agreed to by the House Energy and Commerce and Ways and Means committees and the Senate Finance Committee would move away from volume-based payments, in which physicians are paid based on the number of tests or procedures ordered, into a value-based system. That would reward them with higher payments when they meet performance thresholds on improved care and quality.

This new system would set up a series of quality measures that physicians will have to meet and would incentivize care coordination, particularly for patients with chronic care needs in which multiple doctors are involved.

The replacement policy is widely supported by medical organizations. But some critics argue the bill is too vague and that its reporting requirements could be ruinous to small practices.

“Aspirationally, it is correct, but we don’t know enough about how to measure value,” said Robert Berenson, the former vice chairman of the Medicare Payment Advisory Commission. “This could mean the end of small general practices for all practical purposes.”