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 “Beneficiaries Would Pay Too Much, With Too Little in Return”

March 24, 2015 – The Center for Medicare Advocacy believes it is in the best interest of Medicare beneficiaries and their doctors to find a permanent solution to the broken physician payment formula called the “Sustainable Growth Rate” (SGR). “Unfortunately, the SGR replacement package from the House is not sufficiently balanced; it asks too much from beneficiaries – and nothing from the pharmaceutical or insurance industries – without providing enough for beneficiaries in return,” said Judith Stein, Executive Director of the Center for Medicare Advocacy.

Who Pays – And Doesn’t Pay – For the “Doc Fix?”

Of the portion of the SGR package that will be offset, roughly half (approximately $35 of the total $70 billion over 10 years) would come from Medicare beneficiaries through changes that will increase their out-of-pocket costs for health care, including:

  • Adding deductibles to Medigap plans purchased in the future;
  • Further means-testing premiums for higher-income beneficiaries, and
  • Overall increases in Part B premiums.

At the same time, neither the pharmaceutical industry nor the insurance industry is being asked to pay for any of this package, although doing so would pay for a major portion of the SGR replacement. Simply reinstating prescription drug rebates for low-income beneficiaries as they existed until 2006, for example, would save an estimated $116 billion over 10 years. Similarly, one provision in the President’s proposed FY 2016 budget to more accurately pay Medicare Advantage plans (by reducing inappropriate “upcoding”) would save more than $36 billion over 10 years, which would pay for beneficiaries’ current share of the SGR package all by itself. Yet neither of these provisions is contained in the House SGR package.

“Structural Reform” of Medicare

While we welcome a discussion about expanding Medicare benefits and reducing beneficiaries’ cost-sharing burdens, we oppose redesigning or restructuring benefits for the purpose of achieving savings – particularly when it is done by shifting even higher health care costs to beneficiaries in order to pay for other segments of the health care sector that are asked to contribute nothing.

We strongly oppose the proposed Medigap changes that would limit coverage to costs above the Part B deductible by new plans purchased beginning in 2020. Doing so will diminish the financial security and protection against high, unexpected out-of-pocket expenses sought by purchasers of such plans who seek an alternative to Medicare Advantage and do not otherwise have supplemental coverage. Further, this change will encourage beneficiaries to join private Medicare Advantage plans – at greater costs to the Medicare program and taxpayers.

In addition, we oppose further means-testing Medicare by making higher-income individuals pay even greater shares of their Part B and D premiums than they already pay now. We support provisions of the SGR package that would make the Qualified Individual (QI) program permanent, and minimally increase and temporarily extend funding for low-income outreach and assistance. However, there are no provisions that would expand the eligibility and scope of the Medicare Savings Programs that provide critical assistance to low-income individuals.

What the SGR Package Does NOT Do For Beneficiaries

Although the SGR replacement package that emerged from the Senate Finance Committee in 2013 would have repealed and replaced the annual Medicare payment caps for outpatient therapy, the current House SGR package keeps the caps in place. It merely extends the “exceptions” process by another two years and makes revisions to the manual review process.  The therapy caps are one of the biggest barriers to medically necessary care faced by individuals with chronic conditions, and since many providers are reluctant to use the exceptions process, individuals who could benefit from ongoing therapy go without.

Similarly, instead of protecting Medicare beneficiaries from the impact of hospital Observation Status by, for example, counting all the time in observation towards the three-day hospitalization requirement for subsequent skilled nursing facility coverage, the current package merely further delays enforcement of the so-called “two-midnight rule,” which is of limited value to beneficiaries.


“Payment for an SGR fix should not rely on increasing out-of-pocket health care costs for people with Medicare, jeopardizing access to needed care, and further diminishing the already tenuous economic circumstances facing many beneficiaries and their families,” said Ms. Stein.

“The Center for Medicare Advocacy recognizes there are trade-offs and compromises in achieving bi-partisan legislative success, and that permanently addressing the perennial SGR problem is important. At this time, however, we cannot support the current package. As the debate shifts to the Senate, we hope further balance and improvements for beneficiaries can be made,” Ms. Stein concluded.


Please contact Lauren Weybrew at or 646-214-0514 if you’d like to speak with a representative of the Center for Medicare Advocacy. Learn more about the Center for Medicare Advocacy, Inc. at or follow the Center on Twitter and Facebook.

The Center for Medicare Advocacy, Inc., established in 1986, is a national nonprofit, nonpartisan law organization that provides education, advocacy and legal assistance to help older people and people with disabilities obtain access to Medicare and necessary health care. We focus on the needs of Medicare beneficiaries, people with chronic conditions, and those in need of long-term care. The organization is involved in writing, education, and advocacy activities of importance to Medicare beneficiaries nationwide.

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