Solving the Sustainable Growth Rate formula conundrum continues steps toward cost savings and care improvements

Abstract

Congress is again attempting to repeal the Sustainable Growth Rate (SGR) formula. The formula is a failed mechanism intended to constrain Medicare Part B physician spending by adjusting annual physician fee updates. Congress has averted formula-driven physician fee cuts each year beginning in 2003 by overriding the SGR, usually accompanied with last-minute disputes about how these overrides should be paid for. Last year Congress achieved bipartisan and bicameral agreement on legislation to replace the SGR—the SGR Repeal and Medicare Provider Payment Modernization Act of 2014, which we refer to as the "2014 SGR fix"—but was unable to find a way to pay for the legislation under current budget rules. Current congressional deliberations appear focused on how to pay for the fix, with wide consensus that the 2014 legislation should remain the basic model for reform. We describe key features of the 2014 SGR fix, place it in the context of both past and ongoing Medicare health policy, assess its strengths and weaknesses as a mechanism to foster improved care and lower costs in Medicare, and suggest further actions to ensure success in meeting these goals.

Keywords: Cost of Health Care; Financing Health Care; Health Reform; Medicare; Physician Payment.