NEW YORK (MainStreet) — Doctors have been aching for a fix on Medicare payments, and last Thursday, by an overwhelming bipartisan majority, the House passed a bill that would reformulate how physicians are reimbursed. In addition, the measure would extend the Children’s Health Insurance Program (CHIP) for two years. However, it would also increase premiums for some Medicare beneficiaries.

H.R. 2 Medicare Access and CHIP Reauthorization Act of 2015, which was negotiated by Rep. Michael Burgess (R-Texas) and House Democratic leader Representative Nancy Pelosi of California, overwhelmingly passed the House by a vote of 392 to 37.

If approved by the Senate, the legislation would repeal the flawed sustainable growth rate (SGR) formula currently in use. The SGR formula places a cap on spending for physicians services. Exceeding the cap has resulted in punitive paybacks, which has failed to work to control physicians spending. The new system would replace the current volume-based system with one that rewards quality care of Medicare beneficiaries. Without this measure in place, and facing a 21% reduction in Medicare payment rates, there is fear that more doctors will stop accepting Medicare patients.

However, the Congressional Budget Office estimates that over the 2015 to 2025 period, the bill would add $141 billion, the majority of its cost, to the nation’s deficit. Certain Medicare beneficiaries would pick up some of the tab in the form of higher premiums. Beginning in 2018, premium share for beneficiaries with modified gross incomes between $133,501 and $160,000 ($267,001 to $320,000 for a couple) would increase from 50% to 65%, 80% for Medicare beneficiaries with annual incomes of $160,001 and up ($320,001 and above for a couple). In addition, certain Medigap plans pay deductibles and copayments so that there are no out-of-pocket costs for the plan holders. However, starting in 2020, new plans that are sold would limit coverage to the costs that exceed the part D deductible, which is currently at $147 a year.

“If this latter proposal goes through, then Medicare Advantage plans, which cover more out-of-pocket expenses than traditional Medicare does, may become even more attractive,” says Joel Shalowitz, clinical professor of Health Enterprise Management at the Kellogg School of Management.

While AARP is generally pleased with the passage of the Medicare SGR reform bill, it expressed concern that Medicare beneficiaries would pay more than their fair share of the “Doc-Fix.” AARP released a statement that read, in part, "we are concerned that Medicare beneficiaries will now face higher out-of-pocket costs, including higher premiums and reduced coverage through certain Medicare Supplemental (Medigap) plans. The typical senior on Medigap is not wealthy—nearly half have annual incomes of less than $30,000."

“In the short run, Medicare beneficiaries will not notice a difference, because Medicare fees and premium levels have been set for this year,” says Shalowitz. “The greatest impact will come next year after we know how the fix will be funded,” he says.

Shalowitz thinks premiums will increase, and deductibles may go up.

“We will not know for sure how that will be done until the Senate passes its own version of the repeal and reconciles it with what the House passed,” Shalowitz says.

The Senate expects to act when they return from spring break.

—Written by S.Z. Berg for MainStreet