Tags: Medicare | Medicare | sustainable growth rate

Medicare: Pros and Cons of Sustainable Growth Rate

By    |   Monday, 29 Jun 2015 12:13 PM

The Sustainable Growth Rate (SGR) was repealed with the passage of the Medicare Access and CHIP Reauthorization Act (MACRA) in April 2015. The legislation, known as the “doc-fix” bill, addressed cuts in payments the SGR threatened annually.

The Sustainable Growth Rate has been around since 1997, when Congress passed the Balanced Budget Act. Prior to that, Congress approved a payment system whereby services were paid based on the resources needed and the total volume of services. That change followed a 10-year period during which Medicare costs grew at an annual rates of more than 13 percent, according to Health Affairs Blog. The SGR formula retained part of the old calculation by continuing to base payments on the volume of services, but it added a new component by tying the payment rates to the gross domestic product (GDP).

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The SGR raised payment rates when Medicare spending for provider services fell short of growth in the GDP and cut provider payments when the growth of the volume of services provided was greater than the GDP. It accounted for the fluctuating number of Medicare participants, service pricing, and changes in the laws, Health Affairs Blog said.

By using volume of services to base provider payments, providers were encouraged to provide more and more services. This then caused the growth services provided to be greater than that of the GDP, which triggered cuts in provider pay. Cuts in provider pay resulted in fewer and fewer providers wanting to treat Medicare patients. To stave off this result, Congress passed a number of actions to adjust provider payments so that the payments would remain competitive and keep providing services to Medicare participants, according to the American College of Physicians.

With the passage of MACRA, the way to pay Medicare participants was moved to what is called a Merit-Based Payment Incentive System (MIPS). The factors that determine the rate of provider payments will be the provider’s performance and the quality of services delivered.

The new system encourages a shift away from the fee-for-service model, with bonuses and annual payment increases for those who shift their patients to value-based payment system, according to Modern Healthcare.

“The transition from fee-for-service to alternative payment models can't happen overnight,” Bill Kramer, executive director for national health policy at the Pacific Business Group on Health, told Modern Healthcare. “Many physician are not ready to do that. This is going to take a change in not only their business model, how they receive payments, but also in the way they provide care.”

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The Sustainable Growth Rate (SGR) was repealed with the passage of the Medicare Access and CHIP Reauthorization Act (MACRA) in April 2015. The legislation, known as the "doc-fix" bill, addressed cuts in payments the SGR threatened annually.
Medicare, sustainable growth rate
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2015-13-29
Monday, 29 Jun 2015 12:13 PM
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