II 

109TH CONGRESS 

2D SESSION S. 3888 

To amend title XVIII of the Social Security Act to sunset the sustainable 

growth rate formula as of January 1, 2009, in order to expedite Congressional action in establishing a new physician payment system that would 

appropriately reimburse physicians by keeping pace with increases in 

medical practice costs and providing stable, positive Medicare updates. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 12, 2006 

Ms. STABENOW introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL 

To amend title XVIII of the Social Security Act to sunset 

the sustainable growth rate formula as of January 1, 

2009, in order to expedite Congressional action in establishing a new physician payment system that would appropriately reimburse physicians by keeping pace with 

increases in medical practice costs and providing stable, 

positive Medicare updates. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Fix And Improve Re5 imbursement (FAIR) for Physicians Act of 2006’’. 


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1 SEC. 2. FINDINGS; PURPOSE. 

2 (a) FINDINGS.—Congress makes the following find3 ings: 

4 (1) The Medicare sustainable growth rate 

5 (SGR) formula, used in establishing payment rates 

6 under the physician fee schedule under the Medicare 

7 program, resulted in significant payment cuts to 

8 physicians and health care professionals in 2002. 

9 (2) The Medicare SGR formula would have re10 sulted in payment cuts to physicians and health care 

11 professionals in 2003, 2004, 2005, and 2006 had 

12 Congress not intervened. 

13 (3) The Medicare SGR formula will result in a 

14 5 percent payment cut to physicians and health care 

15 professionals effective January 1, 2007. 

16 (4) According to the Medicare Payment Advi17 sory Commission (MedPAC) and the Board of 

18 Trustees of the Federal Hospital Insurance Trust 

19 Fund and the Federal Supplementary Medical In20 surance Trust Fund, the Medicare SGR formula will 

21 result in substantial payment cuts to physicians and 

22 health care professionals through at least 2015. 

23 (5) MedPAC does not support the impending 

24 payment cuts described in paragraphs (3) and (4) 

25 and is concerned that such consecutive annual payVerDate Aug 31 2005 21:13 Sep 18, 2006 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3888.IS S3888

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1 ment cuts would threaten access to physician serv2 ices over time, particularly primary care services. 

3 (6) MedPAC has raised concerns over current 

4 payment policies that may discourage medical stu5 dents and residents from becoming primary care 

6 physicians because many Medicare beneficiaries rely 

7 on primary care providers for important health care 

8 management. 

9 (7) According to a 2006 American Medical As10 sociation survey, if payment cuts to physicians under 

11 the Medicare program go into effect, 45 percent of 

12 physicians plan to decrease the number of new Medi13 care patients they accept, 50 percent of physicians 

14 plan to defer the purchase of information tech15 nology, 37 percent of physicians who treat patients 

16 living in rural communities will discontinue rural 

17 outreach services, and 43 percent of physicians will 

18 decrease the number of new TRICARE patients they 

19 accept. 

20 (8) MedPAC, who considers the Medicare SGR 

21 formula a flawed, inequitable mechanism for control22 ling the volume of services, first recommended repeal 

23 of the Medicare SGR formula in 2001 and since 

24 then has consistently recommended repealing the 

25 formula. 


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1 (9) Annual actions by Congress to override the 

2 Medicare SGR formula result in instability and un3 predictability for physicians, health care profes4 sionals, seniors, and individuals with disabilities. 

5 (10) Annual actions by Congress to override the 

6 Medicare SGR formula do not solve the long-term 

7 problem as the formula extracts the added spending 

8 in future years by imposing ever more drastic cuts. 

9 (11) Stable, positive updates under the Medi10 care physician fee schedule that accurately reflect 

11 medical practice cost increases are vital for encour12 aging and economically supporting physicians’ ability 

13 to make the significant financial investment required 

14 for health information technology and participation 

15 in quality improvement programs. 

16 (12) A stable payment system for physicians is 

17 critical to preserve Medicare beneficiaries’ access to 

18 high-quality health care. 

19 (13) Adopting MedPAC’s recommendation to 

20 update payments for physicians’ services under the 

21 Medicare program in 2007 and 2008 by the pro22 jected change in input prices less MedPAC’s expec23 tation for productivity growth is necessary to allow 

24 M.D.s, D.O.s, and health care professionals to con25 tinue to provide access to high-quality Medicare 


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1 services for all Medicare beneficiaries while giving 

2 Congress time to develop an alternative payment 

3 system that accurately reflects the costs of providing 

4 care to Medicare beneficiaries 

5 (b) PURPOSE.—The purpose of this Act is to sunset 

6 the Medicare sustainable growth rate formula as of Janu7 ary 1, 2009, in order to expedite Congressional action in 

8 establishing a new physician payment system under the 

9 Medicare program that would appropriately reimburse 

10 physicians by keeping pace with increases in medical prac11 tice costs and providing stable, positive Medicare updates. 

12 SEC. 3. SUNSET OF MEDICARE SUSTAINABLE GROWTH 

13 RATE FORMULA. 

14 (a) IN GENERAL.—Subsection (f) of section 1848 of 

15 the Social Security Act (42 U.S.C. 1395w–4) is repealed. 

16 (b) EFFECTIVE DATE.—The repeal made by sub17 section (a) shall apply to services furnished on or after 

18 January 1, 2009. 

19 SEC. 4. ESTABLISHMENT OF PHYSICIAN PAYMENT UPDATE 

20 COMMISSION. 

21 (a) ESTABLISHMENT.— 

22 (1) IN GENERAL.—There is established a com23 mission to be known as the ‘‘Physician Payment Up24 date Commission’’ (referred to in this section as the 

25 ‘‘Commission’’). 


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1 (2) MEMBERSHIP.— 

2 (A) COMPOSITION.—The Commission shall 

3 be composed of 17 members appointed by the 

4 Comptroller General of the United States, upon 

5 the recommendation of the Majority and Minor6 ity Leaders of the Senate. 

7 (B) DATE OF APPOINTMENTS.—Members 

8 of the Commission shall be appointed not later 

9 than 3 months after the date of enactment of 

10 this Act. 

11 (3) QUALIFICATIONS.— 

12 (A) IN GENERAL.—The membership of the 

13 Commission shall include individuals with na14 tional recognition for their expertise in health 

15 finance and economics, actuarial science, inte16 grated delivery systems, allopathic and osteo17 pathic medicine and other areas of health serv18 ices, and other related fields, who provide a mix 

19 of different professionals, broad geographic rep20 resentation, and a balance between urban and 

21 rural representatives. 

22 (B) INCLUSION.—The members of the 

23 Commission shall include (but not be limited to) 

24 physicians and other health professionals, em25 ployers, third-party payers, individuals skilled 


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1 in the conduct and interpretation of biomedical, 

2 health services, and health economics research 

3 and technology assessment. Such membership 

4 shall also include representatives of consumers 

5 and the elderly. 

6 (C) MAJORITY PHYSICIANS AND OTHER

7 HEALTH PROFESSIONALS.—Individuals who are 

8 physicians or other health professionals shall 

9 constitute a majority of the membership of the 

10 Commission. 

11 (4) TERM; VACANCIES.— 

12 (A) TERM.—A member shall be appointed 

13 for the life of the Commission. 

14 (B) VACANCIES.—A vacancy on the Com15 mission— 

16 (i) shall not affect the powers of the 

17 Commission; and 

18 (ii) shall be filled in the same manner 

19 as the original appointment was made. 

20 (5) MEETINGS.—The Commission shall meet at 

21 the call of the Chairperson. 

22 (6) QUORUM.—A majority of the members of 

23 the Commission shall constitute a quorum, but a 

24 lesser number of members may hold hearings. 


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1 (7) CHAIRPERSON.—The Comptroller General 

2 shall designate a member of the Commission, at the 

3 time of the appointment of the member, as Chair4 person. 

5 (b) DUTIES.— 

6 (1) STUDY.—The Commission shall conduct a 

7 study of all matters relating to payment rates under 

8 the Medicare physician fee schedule under section 

9 1848 of the Social Security Act (42 U.S.C. 1395w– 

10 4). 

11 (2) RECOMMENDATIONS.—The Commission 

12 shall develop recommendations on the establishment 

13 of a new physician payment system under the Medi14 care program that would appropriately reimburse 

15 physicians by keeping pace with increases in medical 

16 practice costs and providing stable, positive Medicare 

17 updates. 

18 (3) REPORT.—Not later than December 1, 

19 2007, the Commission shall submit to the appro20 priate Committees of Congress and the Medicare 

21 Payment Advisory Commission— 

22 (A) a detailed statement of the findings 

23 and conclusions of the Commission; and 


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1 (B) the recommendations of the Commis2 sion for such legislation and administrative ac3 tions as the Commission considers appropriate. 

4 (c) POWERS.— 

5 (1) HEARINGS.—The Commission may hold 

6 such hearings, meet and act at such times and 

7 places, take such testimony, and receive such evi8 dence as the Commission considers advisable to 

9 carry out this section. 

10 (2) INFORMATION FROM FEDERAL AGENCIES.— 

11 (A) IN GENERAL.—The Commission may 

12 secure directly from a Federal agency such in13 formation as the Commission considers nec14 essary to carry out this section. 

15 (B) PROVISION OF INFORMATION.—On re16 quest of the Chairperson of the Commission, 

17 the head of the agency shall provide the infor18 mation to the Commission. 

19 (3) POSTAL SERVICES.—The Commission may 

20 use the United States mails in the same manner and 

21 under the same conditions as other agencies of the 

22 Federal Government. 

23 (d) COMMISSION PERSONNEL MATTERS.— 

24 (1) COMPENSATION OF MEMBERS.— 


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1 (A) IN GENERAL.—Members of the Com2 mission shall serve without compensation in ad3 dition to the compensation received for the serv4 ices of the member as an officer or employee of 

5 the Federal Government. 

6 (B) TRAVEL EXPENSES.—A member of the 

7 Commission shall be allowed travel expenses, in8 cluding per diem in lieu of subsistence, at rates 

9 authorized for an employee of an agency under 

10 subchapter I of chapter 57 of title 5, United 

11 States Code, while away from the home or reg12 ular place of business of the member in the per13 formance of the duties of the Commission. 

14 (2) STAFF AND SUPPORT SERVICES.— 

15 (A) EXECUTIVE DIRECTOR.—The Chair16 person shall appoint an executive director of the 

17 Commission. 

18 (B) STAFF.—With the approval of the 

19 Commission, the executive director may appoint 

20 such personnel as the executive director con21 siders appropriate. 

22 (C) APPLICABILITY OF CIVIL SERVICE

23 LAWS.—The staff of the Commission shall be 

24 appointed without regard to the provisions of 

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1 ments in the competitive service, and shall be 

2 paid without regard to the provisions of chapter 

3 51 and subchapter III of chapter 53 of such 

4 title (relating to classification and General 

5 Schedule pay rates. 

6 (D) EXPERTS AND CONSULTANTS.—With 

7 the approval of the Commission, the executive 

8 director may procure temporary and intermit9 tent services under section 3109(b) of title 5, 

10 United States Code. 

11 (e) TERMINATION OF COMMISSION.—The Commis12 sion shall terminate 30 days after the date on which the 

13 Commission submits the report of the Commission under 

14 subsection (b)(3). 

15 (f) REVIEW AND RESPONSE TO RECOMMENDATIONS

16 BY THE MEDICARE PAYMENT ADVISORY COMMISSION.— 

17 (1) IN GENERAL.—Not later than January 1, 

18 2008, the Medicare Payment Advisory Commission 

19 shall— 

20 (A) review the recommendations included 

21 in the report submitted under subsection (b)(3); 

22 and 

23 (B) submit to the appropriate Committees 

24 of Congress a report on such review. 


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1 (2) CONTENTS OF REPORT ON REVIEW OF COM2 MISSION RECOMMENDATIONS.—The report sub3 mitted under paragraph (1)(B) shall include the fol4 lowing: 

5 (A) If the Medicare Payment Advisory 

6 Commission supports such recommendations, 

7 the reasons for such support; or 

8 (B) If the Medicare Payment Advisory 

9 Commission does not support such rec10 ommendations, the recommendations of the 

11 Medicare Payment Advisory Commission, to12 gether with an explanation as to why the Medi13 care Payment Advisory Commission does not 

14 support the recommendations of the Commis15 sion. 

16 (g) AUTHORIZATION OF APPROPRIATIONS.—There 

17 are authorized to be appropriated such sums as may be 

18 necessary to carry out this section. Such appropriation 

19 shall be payable from the Federal Supplementary Medical 

20 Insurance Trust Fund under section 1841 of the Social 

21 Security Act (42 U.S.C. 1395t). 

Æ 


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