A proposal to replace the antiquated Medicare sustainable growth rate formula with steady pay increases and a pay-for-performance option unanimously passed the House Energy and Commerce Committee this week and will be sent to the House Ways and Means Committee before going to the full House for a vote.

The legislation would replace the SGR, the system used now to determine Medicare physician payments. An updated version of the legislation was released on July 18 that accounts for feedback obtained by the House Health subcommittee from both lawmakers and stakeholder organizations.

The committee’s new draft legislation offers a fee-for-service system in which providers report quality measures that would be applied to each specialty. For the first four years of the legislation––2014 through 2018––Medicare would stabilize current payment rates and add a 0.5% pay increase each year. Starting in 2019, providers would continue to receive that annual 0.5% update, and those practicing in fee-for-service would receive an additional update adjustment based on quality performance under a new update incentive program, or UPI. High-performing providers—meaning those who achieve a certain threshold—would have the chance to earn a 1% bonus payment based on previous performance, while low-performing providers would see a 1% reduction in payments.

The sticking issue on the proposal is finding money in the Congressional budget to cover the $139 billion cost over the next 10 years—a much lower number than in previous years due to the decline in Medicare cost growth.

To view the updated draft legislation, click here.