What is the Sustainable Growth Rate (SGR), and how does it pertain to the Medicare Physician Payment system?
The SGR is a formula, mandated by law, that which ties Medicare payments to physicians and other healthcare professionals to changes in the economy, the total cost of all physician services in previous years, the number of Medicare beneficiaries, and several lesser factors. Under this formula, payments are cut if Medicare patients' use of services exceeds the gross domestic product (GDP). In April of 2006 the Centers for Medicare and Medicaid Services (CMS) predicted that physician costs would outpace the GDP, thus requiring Medicare payments to be cut by 4.6% in 2007.
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Why are physician costs for Medicare patients rising?
According to CMS, physician costs for treating Medicare patients rose 7.5% in 2005. These increases were driven by scientific and medical breakthroughs as well as changing government policies-not by the physicians themselves. The development of new drugs and congressional expansion of Medicare to cover new screening tests were both factors. Included in this increase were items and procedures such as laboratory and imaging services, greater patient evaluation and care management, and physical therapy. All of these have combined to improve the health and extend the lives of Medicare patients.
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Has this been a problem in the past and what was done about it?
Last year, CMS predicted a similar cut to physician payments for 2006, and a 4.4% cut took effect January 1, 2006. AGS and other groups urged Congress to take action, which it did. In February of 2006, Congress and President Bush gave final approval to the Deficit Reduction Act of 2005, which reversed the 4.4% cut. The act did not make any changes to the SGR formula, however, thus setting the stage for similar problems in the future.
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Who else is concerned about reforming the Medicare Physician Payment system?
While there has been bipartisan support in Congress for fixing this problem, as evidenced by the Deficit Reduction Act, no long-term solutions have been implemented. This is despite calls by the AGS, the American Medical Association (AMA), and dozens of other national and state level organizations that have advocated replacing the SGR with a system based on performance measures. (Click here for more information on the Pay-For-Performance payment system advocated by the AGS.) Even CMS has advised Congress to replace the SGR formula with one that "provides better support for quality care and efficiency."
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What will be the outcome of not reforming the Medicare Physician Payment System?
The CMS projects that, over the next nine years, the SGR will mandate cuts in payments to physicians totaling 34%. Meanwhile, the AMA predicts that practice costs for physicians treating Medicare patients will increase 22%. This is already having an effect on Medicare patients' access to healthcare. A 2005 Medicare Payment Advisory Commission (MedPAC) survey found that 25% of Medicare patients looking for a new physician had difficulty finding one. In a recent AMA survey, 45% of physicians said that next year's projected cuts would force them to decrease or stop seeing new Medicare patients. What's more, these mandated cuts will also affect the over 9 million Active Duty, National Guard, Reserve, and retired military patients and their family members, since payments made to physicians through TRICARE, the insurer for the Defense Department, are also governed by the SGR formula.
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What can I do to help?
Make sure to take action via the AGS' advocacy campaign "Improve Access to Quality Care - Reform the Medicare Payment System!" This campaign offers you a quick and easy way to send a message to your elected representatives in Congress detailing how important it is they both take steps this year to block these cuts from going into effect and fix the system to prevent similar problems in the future. Once you're done sending your message, you'll be prompted to "Tell-a-Friend." Please take the opportunity so your friends and colleagues can also take action.
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