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The PREP Plan: A Permanent Fix for the Sustainable Growth Rate

Mar 9, 2015 | Health Care

On April 1 of this year, physicians face a 21 percent cut to their Medicare payments resulting from the return of the Sustainable Growth Rate (SGR) formula. Since 2003, Congress has continuously averted these cuts through temporary “doc fixes,” but last year they came together on a bipartisan, bicameral, and Tricommittee basis to identify a permanent fix to the SGR that would put in place a more value-based payment model. The replacement would represent a marked improvement to Medicare’s payment system, better rewarding high-quality and more coordinated care, rather than simply the number of services provided.

Rather than continuing to punt on replacing the SGR, policymakers should pursue a permanent fix in the spirit of the Tricommittee plan. However, such a plan must not add to the current law deficit, which means identifying approximately $175 billion of savings (or cost reductions within the Tricommittee bill) over the next decade to offset the full cost of reform, or $215 billion to also make permanent a host of temporary policies (“health extenders”) that generally accompany doc fixes. Done right, these savings can further help efforts to improve the Medicare program and bend the health care cost curve.

Last year, CRFB released the Paying for Reform and Extension Policies (PREP) Plan, which proposed specific changes to pay for permanent SGR reform (along with a variety of “tax extenders” and “health extenders”). Since then, we have updated the PREP Plan with new estimates and policies, outlined below. Of course, this is only one of many possible packages to offset SGR reform. But whatever options policymakers choose – and whether they pursue a permanent or temporary doc fix – they should continue the historical precedent of ensuring doc fixes do not worsen an already precarious fiscal situation.

Read the full paper below, or download a printer-friendly version here.