House and Senate Committees Take First Steps to Reform Medicare Payment Policies

December 17, 2013

Last week, both the House Ways and Means Committee and the Senate Finance Committee voted out of committee Medicare payment reform legislation that would replace the current sustainable growth rate (SGR) formula with a system based more on the value of services received over volume of services performed.

As part of the House Ways and Means proposal, services under the fee schedule would receive a 0.5% update through 2016, after which time rates would be maintained at the 2016 rates. Beginning in 2017, physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse anesthetists would move to a value-based purchasing (VBP) model, where a portion of their reimbursement would be through bonuses or reductions in pay based on the submission of data related to quality, resource use, and outcomes. It is anticipated that audiologists and speech-language pathologists would fall under the VBP beginning 2019.

The repeal of the therapy caps was not included in the House bill. However, during consideration of the House bill, Representatives Xavier Becerra (D-CA) and Erik Paulsen (R-MN) expressed concern that the bill did not include repeal of the caps and urged the House to include this as the bill moves to a full vote by the House of Representatives. This prompted House Ways and Means Committee Chairman Dave Camp (R-MI) to state that the committee plans to address therapy caps and under extenders as the bill moves to the House floor.

The Senate Finance Committee's proposal would also move providers to a VBP model, but does not include a 0.5% update through 2016. Additionally, the Senate proposal included language that would repeal the therapy caps and replace the caps with a prior-authorization system for services identified by the Secretary as outliers. In an effort to develop new payment models for outpatient therapy services, the Senate language also calls for the Centers for Medicare & Medicaid Services to collect standardized data elements. This data collection requirement would replace the current reporting of functional limitation measures.


Congress has not yet determined how to finance the cost of Medicare payment reform legislation. Both bills still need to be approved by each chamber, reconciled, and signed by the President before becoming law.

As Congress works on long-term reform for the SGR and repeal of the therapy caps, the House and Senate are set to vote on a measure that would extend the current Medicare rate through March 2014 and extend the current therapy cap exceptions process for the same period of time.

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