Are We Finally Ready To Fix The Medicare Sustainable Growth Rate Formula?

Lee C. Rogers DPM

After several years of predicted physician pay decreases, people are finally talking about replacing the Medicare Sustainable Growth Rate (SGR) formula. This formula calculated an adjustment to the physician fee schedule of -21.3 percent in 2010, -25 percent in 2011 and -27.4 percent in 2012. The American Taxpayer Relief Act of 2012 had averted the most recent decrease and replaced the conversion factor with 0 percent until 2014. In all, Congress has overridden scheduled cuts 15 times since 2003.

The SGR is a broken system, which needs to be replaced. It will require political willpower to get a replacement to pass Congress.

The best possibility for a permanent replacement may occur this August when the Congressional Budget Office updates its baseline estimates. The current estimate for replacing the SGR formula is $139 billion over 10 years. This is significantly better than the $300 billion estimate just three years ago.

So, if Congress gets its “act” together, what would a SGR replacement look like?

Two years ago, the American Medical Association (AMA) recommended that Congress adopt a three-step approach. First, repeal the SGR. Then implement a five-year period of positive Medicare payment updates based on practice costs. Finally, test and transition multiple payment models designed to enhance the coordination, quality and appropriateness of care while addressing cost concerns. Given that practices and specialties differ, the AMA is apprehensive to recommend a “one-size-fits-all” formula. Instead, the AMA advocated replacing the SGR with a menu of new payment models that physicians could choose from. These include shared savings, gain sharing or payment bundling.

Representative Tom Price, MD, (R-GA) proposed the Medicare Patient Empowerment Act in the 113th Congress (not to be confused with the congressman’s new Empowering Patients First Act, which is another attempted repeal of the Patient Protection and Affordable Care Act). The Medicare Patient Empowerment Act would allow doctors to privately contract with Medicare patients without penalty. The law currently forbids doctors from contracting with Medicare patients directly unless they opt out of Medicare completely. Additionally, the Centers for Medicare and Medicaid Services (CMS) is working on alternative models to fee-for-service, which rewards value instead of volume.

In order to get a workable replacement, congressional leaders will have to put their differences aside and work together. Representative Kevin Brady (R-TX) is the Chairman of the Ways and Means Subcommittee on Health. He stated that replacing the SGR is a high priority for him.

While we are far from achieving success, the lower Congressional Budget Office SGR replacement cost has been a driving force to help further discussion.

Further Reading

1. Pittman D. Bill near to repeal SGR? MedPage Today. Available at . Published February 7, 2013. Accessed June 26, 2013.

2. Pittman D. More alternatives emerging for SGR replacement. MedPage Today. Available at . Published May 14, 2013. Accessed June 26, 2013.

3. Pittman D. Congress moves forward on SGR replacement. MedPage Today. Available at . Published April 4, 2013. Accessed June 26, 2013.

4. Fiegl C. AMA unveils SGR replacement. American Medical News. Available at . Published May 16, 2011. Accessed June 26, 2013.

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