Since 1998, Medicare has attempted to control spending on physician services through its sustainable growth rate formula, or SGR, which seeks to limit growth in doctors' fees to growth in the overall economy. In a New England Journal of Medicine Perspective, The Commonwealth Fund's Stuart Guterman discusses the SGR's drawbacks and the recent efforts to address them.
What the Study Found
"The SGR fails to address volume and intensity—the factors driving Medicare spending growth—directly, and its across-the-board reductions in physician fees actually penalize individual physicians who do control their costs," Guterman writes. Moreover, it fails to provide incentives for improving the quality, appropriateness, or coordination of care for patients.
For years, policymakers have called for repealing the SGR, but the estimated cost of eliminating the physician fee cuts was high—$271 billion in 2012. With the recent slowdown in health care spending, the cost of replacing the SGR with a 10-year fee freeze fell to a more palatable $117 billion as of May 2013. By late 2013, three congressional committees had passed, with bipartisan support, bills to improve the accuracy of the current fee schedule, encourage participation in performance-based payment models, and increase transparency. Ultimately, though, the bipartisan agreement fell apart over how to pay for the SGR repeal, and a one-year deferral of SGR cuts was signed into law in April 2014.
Despite this outcome, there is still widespread agreement that the SGR must be repealed and a growing realization that the current fee-for-service payment system, which incentivizes physicians to provide a greater volume of services, must be replaced with a system that instead rewards providers for delivering more coordinated, effective, and efficient care. "We can only hope that the recent momentum will continue and Congress will use the next year to reach agreement on a more permanent solution," Guterman concludes.