The Sustainable Growth Rate formula. Few aspects of Medicare have been more problematic for physicians.
Designed to control Medicare costs, Congress has spent more since 2003 to delay SGR cuts than it would cost to fund current repeal legislation.
Passed as part of the Balanced Budget Act of 1997, the SGR was designed to make sure Medicare expenditures did not grow faster than the Gross Domestic Product based on four factors: estimated change in physician fees, estimated number of Medicare fee-for-service beneficiaries, estimated 10-year average change in GDP, and estimated changes in expenditures due to law or regulation.
It was not, however, designed to keep up with the Baby Boom. Because it does not adjust for the influx of boomers, it guarantees to produce pay cuts just as demand for physician services grows.
The next pay cut – 21% this time – is slated for April 1.
For doctors, the constant specter of lower payments simply makes it hard to do business.
Dr. Robert Juhasz
“Each year, when there is supposedly a cut, it is a consideration for practices that they have to create some contingency thinking, ‘if this were actually to take place, how will I continue to maintain my practice?’ ” Dr. Robert Juhasz, president of the American Osteopathic Association, said in an interview. “If they have a high Medicare population that they take care of, and certainly if there was that kind of a cut, they could not sustain that and would have to make changes.”
Dr. Blase Polite, chair of the American Society of Clinical Oncology Government Relations Committee, agreed. “Ever since the flawed formula was put in place, it has created yearly uncertainty. In recent years, we have had it to the point where the SGR cuts went into effect and then we had to do things like hold bills for a month or 2 months to resubmit them when the SGR would get patched. It became an absolute nightmare from a small business operating standpoint.”
But the tyranny of the SGR may have outgrown itself. In January, the U.S. Department of Health & Human Services announced a major expansion of its efforts to base physicians’ Medicare pay on value instead of volume, calling for half of all Medicare payments to be out of the fee-for-service system by 2018.
“This is the first time in the history of the program that explicit goals for alternative payment models and value-based payment models have been set for Medicare,” HHS Secretary Sylvia Burwell said in an editorial Jan. 26 in the New England Journal of Medicine (doi:10.1056/NEJMp1500445).