Healthcare economists propose overhaul of Sustainable Growth Rate formula

Congress can never seem to solve the conundrum that is the Sustainable Growth Rate (SGR)  formula used to calculate the rates the Medicare program pays physicians. It's an issue that the legislative body has been ducking for more than a decade with annual patches and occasional near-misses with proposed fixes.

However, scholars with Mathematica Policy Research in the District of Columbia note in the most recent issue of Health Affairs that there could be an effective way to repair the SGR for good. They urged a permanent fix, observing that "repeal of the SGR would give physicians certainty concerning payment and would rid Congress of a failed cost control policy that has turned into a political and budgetary albatross."

The current "patch" for the SGR expires on March 31. Congress will either have to approve another patch or permanently repeal the formula so physicians won't face a 21 percent cut in Medicare reimbursement beginning April 1. 

For the most part, the authors suggest that Congress hold onto the failed framework for a fix that was proposed last year but collapsed when Democrats and Republicans could not agree on ways to pay for the additional costs associated with implementing the fix. Members of Congress debated alternatives to that proposal earlier this year.

The authors explain how the SGR fix would impact physician pay. The physicians paid for fee-for-service would receive 0.5 percent annual bumps in pay for the next several years, while those who engage in value-based payments, accountable care organizations or other alternative models would have an opportunity to receive bonus payments of as much as 5 percent. In 2024, fee-for-service doctors would continue to receive the 0.5 percent payment bumps indefinitely, while those in the alternative payment model would receive 1 percent annual payment increases moving forward.

But the Health Affairs authors suggest instead of a fee-for-service pathway, the physicians be paid on a Medicare-proposed merit-based system based on such tangibles as whether they report quality measures and use electronic health records, among others. They would be paid or penalized as much as 4 percent per year in bonuses from 2018, and would rise to plus or minus 9 percent by 2021.

"The proposed merit-based incentive payment system would reduce the return on using inaccurate fee schedule valuations and other methods to increase fee-for-service revenues, because the highest-cost providers would be penalized up to 2.7 percent of their revenue by 2021," the authors wrote.

To learn more:
- read the Health Affairs article