Looming Reform of Sustainable Growth Rate Restraint on Medicare Physician Payments is Potential $300B "Elephant in the Room"

Significant federal budget deficit exposure heightens the challenge for the Super Committee, may harm U.S. credit rating

EMERYVILLE, Calif., Sept. 13, 2011 - Nine years of congressional overrides of the sustainable growth rate (SGR) provision of the Balanced Budget Act of 1997 (Public Law 105-33) is the "elephant in the room," leaving the federal government with significant budget deficit exposure, according to an analysis released today by MedeAnalytics, a leading provider of healthcare performance management solutions. The report is titled "The Sustainable Growth Rate: The Elephant in the Room of Deficit Reduction" and is available at the MedeAnalytics Sustainable Growth Rate Resource Center: www.medeanalytics.com/sgr.

"Putting off reform of the SGR even for a year would result in implementation of a very significant decrease to Medicare physician fees in calendar year 2012, which would lead to reduced physician participation in Medicare, and therefore patients' access to care. A permanent fix-whenever it ultimately becomes a reality-will impose costly years of reckoning," says report author Ken Perez, director of MedeAnalytics' healthcare policy team and the company's senior vice president of marketing. "Although arcane and heretofore obscure, SGR reform merits entry into the calculus of deficit reduction and will be factored into the appraisal of our nation's creditworthiness by the credit rating agencies."

Options, Scenarios, Impact
The report-which examines the history of the SGR and congressional overrides of the provision - details the potential cumulative effect of temporary fixes in the broader context of the Budget Control Act of 2011 (BCA), generally referred to as the "debt deal." The report also reviews various efforts to reform the SGR, outlines four options for addressing the problem, and discusses in detail three possible scenarios:

1) Do nothing. Under this scenario, a 29.5 percent reduction in Medicare physician fees would take effect on Jan. 1, 2012-in addition to reductions called for under the BCA.

2) Carry out another temporary fix. This scenario increases the eventual cost of a permanent fix, highlighting Congress' lack of resolve to find a permanent solution-a fact that would assuredly be noted by the credit rating agencies, possibly contributing to future downgrades of the sovereign credit rating of the U.S.

3) Reform or replace. This scenario-assuming congressional passage of one of the most likely SGR options-would increase Medicare spending on physician services by approximately $300 billion during 2012-2021 and would necessitate offsetting cuts in other parts of Medicare and Medicaid, and quite possibly in other, non-healthcare sectors.

About MedeAnalytics
Founded in 1994, MedeAnalytics delivers performance management solutions across the healthcare system-including hospitals, physician practices and payers-to ensure accountability and improve financial, operational and clinical outcomes. For more information, visit www.medeanalytics.com.