SGR’s $125 billion price tag remains significant hurdle, physician groups say

February 6, 2014

The Sustainable Growth Rate replacement bill passing Congress today would guarantee .5% Medicare reimbursement increases for five years while new payment models are developed and phased in. But medical groups remain cautiously optimistic.

Doctors’ groups and others in the medical profession are expressing optimism over today’s announcement that Congress has agreed on legislation to repeal the Sustainable Growth Rate (SGR), the controversial formula used to set Medicare reimbursements for healthcare providers. Over the next five years, as new payments models are phased in, Medicare providers would be guaranteed annual .5% reimbursement increases.

The agreement combines the work of two committees in the U.S. House of Representatives and one in the Senate into a single bill, known as the “SGR Repeal and Medicare Provider Payment Modernization Act of 2014.” The legislation must still be passed by both houses of Congress and signed by President Obama before it becomes law.

 “The AMA (American Medical Association) congratulates House and Senate negotiators for taking this critical stem toward reforming the nation’s Medicare program,” AMA President Ardis Dee Hoven said in a prepared statement.

 “The bipartisan bicameral SGR agreement today is a significant step forward in repealing the SGR and restoring stability to the Medicare physician payment system,” said Anders M. Gilberg, senior vice president for government affairs for the Medical Group Management Association. “Congress will now have to coalesce around a plan to pay for this legislation. The over $125 billion cost remains the most significant hurdle to its passage.”

 In a statement, Charles Cutler, MD, FACP, chair of the Board of Regents of the American College of Physicians said the college “strongly supports” the proposed legislation.

 The legislation, as currently worded, would repeal the SGR and begin a transition away from a volume-based reimbursement system and towards one based on value and quality outcomes. Some other notable elements include:

  • Consolidating three existing quality programs into one that rewards providers for meeting performance thresholds;

  • Implements a process for improving payment accuracy;

  • Provides incentives for improved chronic care coordination; and

  • Introduces physician-developed clinical care guidelines

Reid Blackwelder, MD, FAAFP, president of the American Academy of Family Physicians, said in a statement that the AAFP “applauds” the legislation,” which he says will “fundamentally change the payment system for health care. Too much money has been wasted paying for duplicated, unnecessary care that does little to improve a patient’s outcome. “

Congress established the SGR in 1997 as a way to healthcare spending by linking Medicare payments to the economy’s overall inflation rate. Actual reductions rarely took place, however. Instead, for most of the last decade Congress as enacted annual “patches” in order to maintain a sustainable level of reimbursements for physicians.

The current patch is set to expire on March 31, meaning that unless the SGR repeal legislation is enacted by that date, Medicare reimbursements will be cut by about 24%.