The House Ways and Means Committee and the Senate Finance Committee have jointly issued a White Paper proposing the repeal of the Medicare Sustainable Growth Rate Formula, entitled “SGR Repeal and Medicare Physician Payment Reform”.
The SGR white paper acknowledges that the Sustainable Growth Rate formula is “fundamentally broken” and that application of the SGR formula would result in a 24.4% decrease in the Medicare physician fee schedule beginning 2014.
As you may recall, the SGR formula was incorporated into the Medicare Physician Fee Schedule basically as a utilization break. When the Medicare Physician Fee Schedule was adopted, it was based upon certain budget assumptions regarding the intensity of utilization and the cost for Medicare Physician Fee payments. If utilization increased faster than the projected budget, there would be an automatic decrease in the Medicare Physician Fee Schedule payment to keep total payments in line with the budget. Since utilization has exceeded assumed intensity for at least the last 10 years, there has been successively larger SGR Medicare reductions which have been postponed by Presidential and Congressional action at the end of each of those calendar years.
The attached proposal does the following:
Permanently repeals the SGR formula;
It freezes the Medicare Physician Fee for Service Fee Schedule for the next 10 years;
It offers the opportunity for physicians to participate in performance based incentive programs; and
It exempts physicians who are already participating in two sided risk programs (such as some accountable care organizations) from the program and provides additional performance bonuses for those physicians starting in 2016.