Medicare Sustainable Growth

The Medicare sustainable growth rate which is also known as SGR is a formula enacted by Congress. It is part of the 1997 Balanced Budget Act (BBA) and it limits spending growth for Medicare by reduction of the amount doctors are paid per year by a certain percentage. The federal government funds Medicare fully unlike Medicaid whose funding is split between the federal government and states.

Consequently, whenever there is an increase in Medicare spending, the federal government bears the biggest hit. Medicare sustainable growth rate is used currently by the Centers for Medicare and Medicaid Services (CMS) to control spending on physician services.

Each year, CMS sends a report to the Medicare Payment Advisory which in turn advises the United States Congress on the expenditures of the previous year as well as the targeted expenditures. A conversion factor is also included in the report and it changes the payment for physicians’ services in the next year to ensure it matches the target set by the SGR.

There are four major factors used when calculating the Medicare sustainable growth rate and they include the following:

• The percentage of estimated change in fees offered for the physician services
• Estimated change in the percentage of average number of Medicare fee for service beneficiaries
• Estimated ten year annual average percentage in change of the real GDP per capita
• Estimated percentage change in expenditures as a result of changes in regulations or laws.

It is important to note the sustainable growth rate does not in any way, control volume and as a matter of fact, cut payments without any regard to the efficiency and quality of c are that is provided by any given physician. Since 2001, the formula has been regarded as flawed and it has also threatened to impose very steep cuts in Medicare physician fee schedule payments especially for care offered to American seniors.

Typically, Congress acts to avert reduction of payments and though this is the case the average payment rate is the same as it was in 2001. Congressional committees in the Senate and House are drafting legislation that will repeal the sustainable growth rate and instead substitute it with a 0.5% annual increase in the physician payments while at the same time offering incentives for use in alternate payment models in order to slow Medicare spending growth.

There have also been repeals for sustainable growth rate and conversations about replacements that have been focused on promotion of healthcare quality, improve the health of the population and patient experience. Opponents of the Medicare sustainable growth rate argue it focuses on punishing or rewarding doctors for the provision of more services instead of providing effective and better health care.

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References

http://www.commonsenseaction.org/medicare_sustainable_growth_rate

http://www.acponline.org/advocacy/state_health_policy/hottopics/sgr.pdf

http://en.wikipedia.org/wiki/Medicare_Sustainable_Growth_Rate