Top Five Questions About the SGR Deal

March 21, 2015

With just five legislative days scheduled before the March 31 expiration of the current patch to the Sustainable Growth Rate (SGR), we thought it would be helpful to provide a brief overview of the current state-of-play with respect to the negotiations to permanently replace Medicare’s flawed physician payment formula.  As we have previously reported, several Senate Democrats have raised objections to the draft bill, citing three major areas of concern: (1) the package will extend the Children’s Health Insurance Program (CHIP) for only two-years, rather than the four-year extension (S. 522) that every Democrat in the Senate has cosponsored; (2) beneficiary-oriented reforms—such as increased means testing of Part B and D premiums, or limits on first-dollar coverage in Medigap—have come under scrutiny from advocacy groups such as AARP; and (3) an abortion policy rider, the Hyde amendment, would bar federal funds from abortions at community health centers. 

Late this afternoon, lead House negotiators began circulating a new one-page summary of the package they have crafted, which they are suggesting is very close to being finalized. The summary includes details regarding CHIP, offsets and other policies.  As the fine points of the deal become clear ahead of potential votes next week, here are the top five questions that we’ll be asking to determine whether or not the bill will ultimately pass:
#1 – There is Broad Coalition of Support. Can it Grow?
Rallying support around such a broad set of entitlement reforms was never expected to be easy.  Conservative fiscal hawks are wary that the deal will saddle the Treasury with substantial new deficit burdens, while liberal Democrats are vowing to oppose any measure that cuts Medicare benefits to seniors.  But while there will certainly be defections on both sides of the aisle when the House takes up an SGR package next week, a surprisingly broad coalition of House leaders have come out in support of the deal.  In a press release issued yesterday by several House and Senate Committee leaders, the budding SGR package garnered support from deficit hawk and House Ways & Means Chair Paul Ryan (R-WI), along with liberal House Democrats including Jim McDermott (D-WA) and Sander Levin (D-MI).  What remains to be seen is how other key leaders—such as Senators Ted Cruz (R-TX), Rand Paul (R-KY), and Elizabeth Warren (D-MA)—become engaged in the process and influence their peers.  Each possess the ability to command a significant bloc of votes in both chambers, or could single-handedly stall proceedings in the Senate.
#2 – Will the Package Mount a Large Margin of Victory in the House?
Minority Leader Nancy Pelosi (D-CA) is working fervently to ensure the support of her House colleagues, while Speaker John Boehner (R-OH) and his team are preemptively circulating talking points to rebut criticisms on provisions like changes to premiums and Medigap plans. For Pelosi’s part, she’s actively working to gain support for the bill and is pushing back against a statement of opposition from Sen. Ron Wyden (D-OR), which raises specific concerns about the Hyde amendment.  A spokesman for Pelosi’s office said yesterday that the language is just continuing the status quo, and that an executive order and HHS regulations already require Hyde language to be applied to community health center funding.  A strong showing of support in the House could certainly alter the tenor of the debate as the legislation moves to the upper chamber.  We’ll be watching closely to see the margin by which the House potentially passes the bill—particularly the amount of Democratic support—as it could be pivotal for the measure’s fate in the Senate.
#3 – Will CMS Wait on the Senate?
The window to pass legislation ahead of lawmaker’s spring break and the March 31 expiration is decidedly narrow.  Current wisdom from Capitol Hill indicates that the package will likely be submitted to the Rules Committee on Tuesday, and will get a vote on the House floor next Thursday.  As the Senate plans to spend all night Thursday (and early Friday morning) processing hundreds of amendments on their fiscal 2016 budget, it wouldn’t be until Friday that the Senate will even be able to take up a motion to proceed to the SGR package.  At that point, Congress would likely adjourn for their two-week spring break, leaving CMS to potentially hold onto their reimbursement checks until about April 14 in hopes that the Senate will return to quickly advance the House-passed package.  Speaker Boehner is said to have indicated little interest in voting on a short-term patch to give the Senate more time to shepherd a package through. 
#4 – Could Recess be the Death of the Deal?
As uncertain as the outlook is in the Senate, it could become even more tenuous throughout a two-week recess in which beneficiary advocates continue to mount their opposition to the deal.  On Tuesday, the influential AARP expressed their opposition to the deal in a letter Members of Congress, and their ability to influence lawmakers will only swell during a two-week recess in which many Senators will have to answer to Medicare beneficiaries during town hall meetings.  Assuming the Senate is forced to sit on the deal over their two-week break, we’ll be watching closely to see whether physicians groups can rally enough support to bring most Democrats on board, or whether groups targeted in the bill’s $70 billion package of offsets can manage to torpedo the deal. 
#5 – Will Senate Democrats Acquiesce?
Sen. Wyden’s strong statement of opposition should certainly bring pause to those hoping to see the SGR be permanently replaced.  But it’s also possible that Wyden and other Senate Democrats—who are not used to the House dictating the terms of major legislation—are simply looking for an avenue to impose their influence over the negotiations in the lower chamber.  It’s worth a look back at the current status of CHIP negotiations to understand what’s at stake in the bill: when every Senate Democrat signed onto legislation extending CHIP funding for four years, that bill included a 23 percent increase in federal matching funds. But when House Democrats proposed that to their Republican leadership counterparts during SGR negotiations, GOP leaders said they could agree to either a two-year extension with the state-funding bump, or a four-year extension without the bump. Ultimately, House Democrats opted for the two-year deal.  And so, while some Senate Democrats may believe it’s more important to secure four years of CHIP funding, others may recognize that the two-year agreement includes real concessions from Republicans, and ultimately decide to drop their opposition to the package.