On Friday morning, the U.S. House of Representatives passed an amended version of H.R. 4015 (237-182) that would repeal the flawed Sustainable Growth Rate (SGR) formula that serves as the underpinning of Medicare physician payment and provide for other Medicare payment reforms.

Unfortunately, the cost of the SGR repeal would be offset with a five-year delay in the tax penalties for individuals who do not obtain health insurance coverage. The delay in the penalties would have the effect of discouraging low income individuals and families from applying for health insurance. With the delay, it is anticipated that money would be saved because low income persons would not apply for insurance and receive the federal health insurance premium subsidies to which they are entitled under the Affordable Care Act. President Obama has indicated that he would veto any legislation that contains this offset provision.

Similar legislation, S. 2122, was recently introduced in the U.S. Senate that would provide for Medicare payment reform but with an offset provision to permanently repeal the Affordable Care Act's requirement for individuals to obtain health insurance coverage. There is not much support in the Senate for this approach and Majority Leader Harry Reid is not expected to schedule S. 2122 for a vote on the Senate floor. The Medicare payment reform bill that is likely to be considered by the Senate at the end of March contains no cost offsets but deviates somewhat from an earlier agreement reached between both chambers of Congress earlier this year.

Unless Congress acts by March 31, 2014, a Medicare physician payment cut of 24 percent will take effect on April 1, 2014. This means that Congress will most likely consider another temporary payment patch to prevent the cuts.