The Medicare Payment Advisory Commission on Monday released a draft list of offsets for its $200 billion plan to replace the sustainable growth rate formula, which sets Medicare physician payment rates.

Since 2002, Congress annually has passed a series of short-term bills to block scheduled cuts to Medicare reimbursement rates under the SGR. The most recent “doc-fix” bill, enacted in December 2010, is scheduled to expire on Jan. 1, 2012, at which point physicians face a 29.4% payment rate cut. MedPAC Chair Glenn Hackbarth last week announced that the advisory panel will vote on a proposal to replace the SGR at its meeting next month.

The offsets could come from recommendations from:

  • Previously issued MedPAC reports, totaling $50 billion; and
  • Other government agencies, including HHS, the Office of Inspector General and the Congressional Budget Office, for an additional $180 billion.

The MedPAC recommendations include:

  • Updating hospital payments by 1% for 2012, while recovering previous overpayments, saving $14 billion;
  • Altering home health care payments in 2013 without an update in 2012, saving $10 billion;
  • Changing reimbursements for some categories of durable medical equipment, saving $8 billion;
  • Repealing bonus payments for quality improvements in Medicare Advantage, saving $6 billion;
  • Implementing copayments for home health episodes, saving $4 billion; and
  • Raising to 75% the compliance threshold for inpatient rehabilitation facilities, saving $3 billion.

Offsets suggested by other agencies include:

  • Requiring drugmakers to pay drug discounts for medicines used by dual eligibles similar to those paid to Medicaid, saving $75 billion.
  • Changing payments for skilled nursing facilities, saving $23 billion;
  • Reducing by 10% laboratory services payments, saving $21 billion;
  • Taxing Medigap plans, generating $12 billion;
  • Reducing payments for preventable readmissions to skilled nursing facilities, home health agencies, long-term acute care hospitals and inpatient rehabilitation facilities, saving $4 billion.
  • Reducing by 6% hospice payment rates for nursing homes, saving $3 billion; and
  • Auditing risk adjustment payments in the Medicare Advantage program, saving $3 billion.