SGR Fix Requires Risk for Doctors

The SGR represents an annual fiscal cliff for doctors yet the political will to fix the problem eludes Congress.

Over the last decade, Medicare’s Sustainable Growth Rate (SGR) formula has become a troubling financial topic for policy makers and physicians alike.  A recent Health Affairs Policy Brief nicely summarizes the history of this formula and the financial conundrum to which it has led.

Based on a concern that physicians were performing too many services for Medicare patients, and therefore costing too much money to the federal government, Congress implemented the SGR formula in 1997.  This complicated formula annually updates the set payment a physician gets for performing each particular kind of service, and ensures that if the rate of growth in volume of services grows too quickly, the payment for each individual service will go down, keeping the overall cost of Medicare from growing faster than national GDP.  The conundrum arose in 2003, when the set price of individual payments was due to decrease, but Congress instead decided to ignore the formula and give a one-time increase to the physician payment schedule.  In 2004, Congress approved another one-time increase, but this time created an even larger gap between actual payment rates and the formulated payment rate, which should have undergone two decreases in 2003 and 2004.

Fast forward to 2013: SGR-mandated cuts have been ignored a total of 14 times, keeping payment rates constant or increasing every year.  If Congress were to allow the SGR to work as planned, physicians would have a resultant 26.5% decrease in current Medicare payments.  Alternatively, to keep current physician payment rates constant over the next 10 years would cost $245 billion, adding to the federal deficit.  Several proposals have been circulated to provide a long-term solution, most of which include freezing physician payments at current levels or even increasing them over the next 10 years.  These proposals would add $200-$400 billion to the deficit, but allow more time for Congress to implement a complete revision of the way physicians are reimbursed, making the SGR null and void.

Commentary

The sustainable growth rate (SGR) has not succeeded in controlling the volume, and therefore the cost, of Medicare services in this country.  No legislators in Congress have the political capital to spend on a vote for a ‘fix’ to the SGR that would add $200 billion to the deficit, nor do they have the heart to force this country’s Medicare enrollees to scramble for access to physicians in the shadow of such drastic Medicare payment cuts.

What’s more, the SGR has demonstrated that putting a cap on spending for all aggregate Medicare services does not entice any individual physician to rein in superfluous spending.  Real influence on physicians to control costs will only come when the financial risk is put directly on their shoulders.

It is only right to have health-care professionals be the ones to weigh the importance of each service considered against the pressures of limited monetary resources, and then make decisions on the behalf of their patients and society.  It seems inevitable that Congress will have to continue to do short-term SGR fixes until is shifted in this manner towards physicians.

“Health Policy Brief: Medicare Payments to Physicians,” Health Affairs, updated January 10, 2013.

by

Lisa Maurer, MD