Another year, another dodge on the sustainable growth rate (SGR) formula. After 10 years of this, isn’t it time for Congress to acknowledge the SGR is a failure and try another approach?  

The formula was established under the Balanced Budget Act of 1997 to replace the Medicare Volume Performance Standard, which lowered or raised fee updates based on Medicare spending that exceeded or fell below a given standard. Like its predecessor, the SGR was designed to limit growth in Medicare spending.

The SGR seemed to survive its first few years, but in 2002, Medicare spending on physician services spiked and Congress responded by temporarily averting fee reductions. That pattern has persisted year after year, and the Senate and House recent approval of the American Taxpayer Relief Act sweeps the issue under the rug for another 11 or so months.  

What changes have occurred with Medicare between 1997 and now? The rolls have grown, for one thing. U.S. Census placed the Medicare population at 39.7 million in 2000 and 47.5 million in 2010. Medicare spending accounted for 2.3 percent of the gross domestic product in 2000 compared with 3.6 percent in 2010 and a projected 6 percent in 2040, due to baby boomers and increased life expectancies.

Those figures are compliments of the Medicare Payment Advisory Committee, which repeatedly has called for a repeal of the SGR. It proposed in 2011 replacing the SGR with 10 years of updates that included a freeze on primary care payment levels and reductions of 5.9 percent for three years for other services, followed by a freeze.  The proposal faced stiff criticism in the healthcare community.

In a December 2012 report, the Government Accountability Office calculated that payments to physicians under the physician fee schedule totaled $67 billion in 2011 and accounted for 12 percent of total Medicare spending. The office had been tapped under tax relief legislation to explore private sector initiatives that linked physician payment rates to quality and efficiency and summarize its findings for Congress.

While a pay-for-performance approach may not be the solution, it may offer a pathway toward a credible Medicare physician payment system and an exit from the cyclical SGR problem.

Candace Stuart

Cardiovascular Business, editor