Tags: Medicare | Medicare | SGR | facts and figures

Facts and Figures: What Are Costs Associated With Sustainable Growth Rate?

By    |   Monday, 29 Jun 2015 12:43 PM

The Sustainable Growth Rate (SGR) was implemented through the Balanced Budget Act of 1997. Although repealed in April 2015 with the passage of the Medicare Access and CHIP Reauthorization Act (MACRA), the SGR had an enormous effect on Medicare services, according to the American College of Physicians.

The SGR was a formula developed to determine provider payments to Medicare providers. Provider payments were to be based on the volume of the services provided. When that volume grew greater than the growth of the gross domestic product (GDP), provider payments would be cut. When the growth of the volume fell short of GDP growth, provider payments would be increased. There was no consideration of quality of services and provider payments; only volume of services provided.

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By 2002 the SGR required that provider payments be cut by 4.8 percent, according to Health Affairs Blog. Providers unwilling to accept the cut in pay became unwilling to treat Medicare participants. To avoid what could have been a serious blow to health care access for Medicare patients, Congress passed a bill to fix the problem by blocking the automatic cuts required by the SGR formula for 2003. The so-called “doc fix” bills became an annual exercise to block required SGR cuts from that point on.

Each year, the “doc fix” bills allowed Medicare providers to continue the rates set the previous year, so the costs continued to rise. In 2006, a new law called the Tax Relief and Health Care Act, implemented an SGR freeze and measures to limit the costs of the “doc fix” bills.

Limiting the costs of “doc fix” bills was an improvement, but the need for them still existed. Had the SGR not been repealed for 2015, it would have required a 21.2 percent cut in physician payments, according to The Brookings Institution. This would affect providers sufficiently that the number of Medicare providers might have been reduced. Another “doc fix” bill would have been required for this year, too.

Aside from the need for repeated Congressional attention, the SGR had several other problems. It failed to address a provider’s performance in any way. It was a flawed budgetary control and did nothing to reward good providers or encourage others to improve.

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The payments to a provider were unreliable and fluctuated each year, leaving providers unsure of their income. Congress was required to spend time developing and implementing “doc fix” bills every year, which prevented it from addressing other issues, The Brookings Institution said. Failure to address the problems inherent in using the SGR could affect access to care for seniors at some point.

Fortunately, with the passage of MACRA, the SGR has passed into history and Congress will no longer be required to fix Medicare provider payments each year. By tying the provider payments to merit and performance, a fair and equitable pay system will be in place and providers will be encouraged to perform better, a move that could benefit seniors on Medicare, Health Affairs Blog said.

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The Sustainable Growth Rate (SGR) was implemented through the Balanced Budget Act of 1997. Although repealed in April 2015 with the passage of the Medicare Access and CHIP Reauthorization Act (MACRA), the SGR had an enormous effect on Medicare services.
Medicare, SGR, facts and figures
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2015-43-29
Monday, 29 Jun 2015 12:43 PM
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