Thursday, April 16, 2015

SUSTAINABLE GROWTH RATE: FORMULA REPEALED AFTER 17 YRS

The Sustainable Growth Rate which was established in 1995 has been a 'trojan horse' lurking and waiting to strike each year at budget time. The SGR caused severe angst to providers and hospitals each year distracting health care providers with a ghost law.

HISTORY--Doc Fixes Began With "The Biggest Backroom Deal"

Congress created the SGR formula in 1997 to put the brakes on Medicare spending for physician services. The formula sets annual spending targets based partly on changes in the gross domestic product. If Medicare spending comes under the target, physician payment rates go up the following year. But if spending exceeds the target, rates are reduced to make up the difference.

The formula became a definite nemesis of organized medicine in 2002 when SGR math yielded a 4.8% pay cut. Another 4.8% dip followed in 2003, and on February 13 of that year, Congress enacted the first of its doc fixes, replacing the 4.8% cut with a 1.4% raise.

The first doc fix was a backwater provision in an omnibus appropriations bill that one lawmaker called the "biggest backroom deal" in the history of Congressional spending, according to the New York Times. It was a 338 to 83 vote in that House that day, 76 to 20 in the Senate.

The history of the SGR and it's real meaning became apparent this year. The Sustainable Growth Rate was never mean to sustain growth, nor to be enforced. The SGR was designed to be used as pawn in the trade of eliminating the onerous clause in return for approval of the Pay for Value rembursement system presently in development by CMS.

For years, organized medicine warned that a rate reduction on the magnitude of 21% would drive physicians out of Medicare and leave seniors in a lurch. Likewise, medical societies constantly chastised Congress for postponing past SGR-triggered pay cuts — kicking the can down the road, they called it — instead of repealing the formula outright. Such "doc fixes," in Congressional parlance, caused the cuts to accumulate into the monster that came to life on April 1.

Organized medicine now has its SGR victory, but not everyone is sanguine about the future of Medicare reimbursement. Last week, the chief actuary of CMS issued a report saying that under MACRA, annual Medicare raises for physicians would not keep pace with rising practice costs in the long run. By 2048, the gap between payments and practice expenses would be greater than if Congress had let the SGR formula take effect, according to the report.

Breaking News on April 14, 2015

Congress Repeals Medicare SGR Formula

After 17 previous Congressional holding actions going back to February 13, 2003, the Senate today clinched the approval of a bipartisan bill that finally repeals Medicare's sustainable growth rate (SGR) formula for physician compensation and averts a 21% pay cut this year.

The Senate vote was 92 to 8.

The House overwhelmingly approved the bill, called the Medicare Access and CHIP Reauthorization Act (MACRA), last month. Now the legislation goes to President Barack Obama, who has promised to sign it. Buried within the law (H.R.2 - Medicare Access and CHIP Reauthorization Act of 2015) are many fine points about calculations, bundled care, and giving the Secretary of HHS unbridled powers to determine physician and hospital fees.

The bill will freeze Medicare rates at pre-April levels through June, and then raise them 0.5% in the second half of the year. They will continue to increase 0.5% each year from 2016 through 2019. At the same time, MACRA will shift Medicare compensation from fee-for-service to pay-for-performance.

Add to this formula the effects of the Affordable Care Act