Medicare Legislative Update: SGR Repeal, CHIP Reauthorization, and PIMA

June 21, 2015 | Featured Articles

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On April 14, 2105 Congress overwhelmingly passed the “Medicare Access and CHIP Reauthorization Act” ( This bill will permanently eliminate the flawed Medicare sustainable growth rate formula (SGR) and replace it with a more stable Medicare payment system, implementing a 0.5 percent rate increase starting in July 2015, with an additional annual 0.5 percent rate increase each January thereafter through 2019. The bipartisan legislation substantially supports the much-needed transition from the current volume-driven fee-for-service (FFS) reimbursement model, to a value-based system that rewards quality of care. The new reimbursement formula has been publicly endorsed by a number of medical associations including the American Medical Association, the American Academy of Pediatrics, the American College of Cardiology, the American Congress of Obstetricians and Gynecologists, and the Association of American Medical Colleges.

The bill will also extend the Children’s Health Insurance Program (CHIP) for two years. CHIP provides low-cost health coverage to children in families that earn too much money to qualify for Medicaid, commonly referred to as the ‘working poor’. Each state offers CHIP coverage, and works closely with its state Medicaid program. In some states, CHIP covers parents and pregnant women. Since its beginning 17 years ago, CHIP has worked together with Medicaid to cut the child uninsured rate in half. Unlike many private insurance plans, which are based on the health needs of adults, CHIP offers insurance with age-appropriate benefits. CHIP plans also provide access to child-specific pediatric subspecialists and surgical specialists.

The bill also contains a set of Medicare fraud measures known as the Protecting the Integrity of Medicare Act 2015 (PIMA) including:

  • Further delay enforcement of the so-called Medicare “two midnight rule” (stays lasting less than two midnights must be treated and billed as outpatient service) for inpatient admissions until September 20, 2015;
  • Loosen existing restrictions on gainsharing with physicians, thereby permitting providers to give bonuses to doctors for reduced costs on services which were not medically necessary;
  • Permit the Department of the Treasury to impose major levies of up to 100 percent on tax delinquent Medicare service providers;
  • Require CMS to stop using Social Security numbers on Medicare beneficiary cards;
  • Modify the face-to-face encounter requirement for durable medical equipment to permit nurse practitioners and physician assistants to perform the encounter if allowable under state law.

Finally, the bill extends the Teaching Health Center Graduate Medical Education Program that provides care to patients in underserved areas by training primary care physicians in community-based settings and it also extends funding for Community Health Centers for two years.

What does this legislation mean for my practice?

  • Instead of the SGR-mandated across-the-board 21 percent fee cut, physicians’ fees will increase 0.5 percent this year and every year through 2019.
  • CMS’s current efforts to improve quality of care through electronic health records and performance reporting will be replaced by a new Merit-based Incentive Payment (MIP) program.
  • Policymakers will begin developing alternative payment models for patient care. Be sure to pay attention to the proposals that will be forthcoming, participate in discussions to ensure they are in your patients’ best interests, and support professional associations and other advocates who are representing you.

For claims that were submitted in April prior to this legislation, there was a temporary hold but should have little practical impact on Medicare remittance. As always, physicians are strongly encouraged to bill their usual and customary fees rather than the fee schedule amount.