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Journal Article


Improving Value in Medicare with an SGR Fix

The Issue

Medicare has a two-part system for reimbursing physicians on a fee-for-service basis: the resource-based relative value scale, which estimates the effort and expenses required to treat patients, and a spending limit known as the sustainable growth rate (SGR) formula, which ties the growth of physicians’ payments to growth in the economy. This payment approach makes it hard to hold physicians accountable for their patients’ outcomes or treatment costs. As of this writing, a bipartisan majority in Congress seems poised to pass legislation that would create an entirely new system based on incentives that drive physicians to improve quality and lower costs.

What the Study Found

In a Commonwealth Fund–supported article published in the New England Journal of Medicine, author Gail Wilensky describes the bipartisan congressional proposals. These would: 1) instill a short period of stability, with modest payment increases or none at all; 2) provide larger increases for physicians participating in alternative delivery system models; and 3) ultimately, reduce payments to physicians who do not improve the value or efficiency of their care.


While the current bipartisan attempts to fixing the SGR hold promise, “the devil is in the details, and those have yet to be spelled out,” Wilensky writes. Those details include how the costs of removing the SGR (estimated to be $140 billion over 10 years) will be paid for, and determining which alternative health care payment or delivery models—accountable care organizations, medical homes, or something else—show evidence of consistent costs savings and thus warrant increased reimbursement. 

Publication Details



G. R. Wilensky, "Improving Value in Medicare with an SGR Fix," New England Journal of Medicine, published online Dec. 11, 2013.