The sustainable growth rate (SGR) formula might be considered health policy’s equivalent of the man-made sinkhole.
Though cuts mandated by the SGR are always threatening, actual cuts rarely appear. When SGR cuts were implemented the only time in 2002, the effects were relatively moderate: a 4.8 percent cut to the rates Medicare pays physicians and other health care providers, based on a variety of cost and economic formulas.
Lawmakers are hoping to have legislation that permanently fixes the Medicare physician payment system on the House floor this summer.
Nevertheless, the entire provider community fears the worst should SGR cuts ever be allowed to go into effect again. Under the current formula, physician payments under Medicare Part B would be slashed 24.4 percent if the SGR cuts were implemented in January 2014. However, Congress almost certainly will not allow that to happen.
“The sustainable growth rate threatens a massive cut to physician payments that could mean many seniors lose access to their doctors,” said Sen. Max Baucus, a Montana Democrat and chair of the Senate Finance Committee, in a recent statement. “It is time to repeal this broken system once and for all.”
The problems with the SGR are due in part to how the formula has been managed, its effects having been compounded by a decade of Congress routinely voting to shelve what should be an annual recalculation of Medicare payments. Those years of putting it off means the cumulative cuts to Medicare payments ballooned to 26.5 percent had they been enacted at the start of 2013—a terrifying prospect for pathologists and other physicians.
With virtually everyone agreeing that the massive backlog of never-enacted reimbursement cuts has rendered the SGR untenable, Baucus’s Senate Finance Committee and the House Energy and Commerce Committee have begun soliciting input from the provider community as to what they would like to see in its place.
Among the proposals that have been floated is one from the Medicare Payment Advisory Commission (MedPAC) that would include three consecutive annual 5.9 percent reductions in payments, followed by seven years of frozen payments. MedPAC introduced that plan in 2011 and still stands by that proposal, although it has since admitted there might be some wiggle room because of recent dips in health care cost inflation.
According to MedPAC Executive Director Mark Miller’s recent testimony before the Senate Finance Committee, the three years of consecutive payment cuts could be reduced to as little as 3 percent annually.
Providers Seek Repeal
By contrast, representatives of the provider community have floated a proposal to repeal the SGR but keep payments at the present rate. Future payments would be based on the medical practice costs. Critics have noted such a formula would all but guarantee automatic payment increases to doctors indefinitely.
Repeal of the SGR has been debated almost as soon as it was passed into law in 1997, itself a replacement for the Medicare volume performance standard formula, which had only been enacted five years prior. However, given Congress’s willingness to vote each year to shelve the formula in lieu of giving providers modest pay increases instead, there has been little momentum to actually repeal the law. There have been 15 such “doc-fixes” over the past decade, costing about $150 billion in total, according to Baucus’s office.
But the fact two congressional committees have been soliciting input from the provider community suggests changes may be coming. What changes are proposed have yet to emerge, however.
Debbee Hancock, the press secretary for the House Committee on Energy and Commerce, said the comments gathered have not been made public. She did not respond to other queries. A spokesperson for the Senate Finance Committee did not respond to written and telephonic requests for comment.
There is no timetable for introducing SGR legislation though sources believe it could happen as early as this summer.
