May 21, 2013
By Michael McLafferty, CPA
The Medicare Sustainable Growth Rate (SGR) is a method currently used by the Centers for Medicare and Medicaid Services (CMS) in the United States to control spending by Medicare on physician services. Enacted by the Balanced Budget Act of 1997 to amend Section 1848(f) of the Social Security Act, the SGR replaced the Medicare Volume Performance Standard (MVPS), which was the previous method that CMS used in an attempt to control costs. Generally, this is a method to ensure that the yearly increase in the expense per Medicare beneficiary does not exceed the growth in Gross Domestic Product (GDP).
Health care providers have been genuinely concerned that their Medicare reimbursement rates will be reduced at the beginning of every calendar year. This is due to the current faulty SGR payment system. Providers are discussing a five-year transition period before moving to a new physician payment system, according to Rep. Kevin Brady (R-Texas), chairman of the Ways and Means Health Subcommittee, who is involved in developing the revised payment system.
Rep. Brady went on to say the next question in developing a sustainable growth-rate replacement measure that is expected to pass this year is how much time is needed even before that transition period begins.
Brady declined to give a timeframe in which he and his colleagues are expected to introduce their long-awaited SGR replacement measure. The question of appropriate transition periods arose repeatedly in a recent hearing by Brady's panel, which featured testimony from provider and insurance representatives.
Brady said representatives crafting an SGR-replacement bill are focused on finding ways to cover the $138 billion, 10-year cost of repealing Medicare's cost-control formula. Even though the Congressional Budget Office-provided estimates dropped in February from its earlier expectation of a $245 billion cost, the challenge of finding a bipartisan way to pay for eliminating the current SGR payment method still appears the chief hurdle to reforming Medicare physician payments.
The demographics of the United States suggests that as the population continues to age, there will be an increase in Medicare patients and at the same time a potential shortage of physicians to service them. It is absolutely essential that CMS revise its payment system to incent physicians to continue to participate in the Medicare Program—and the sooner the better.