The tragedy of the sustained growth rate formula continues into 2014: is there hope for repeal?

A recent health care policy article describes the sustained growth rate (SGR) as a mythical sword of Damocles hanging over the physicians (1). The SGR formula is an approach to restrain the growth of Medicare spending on physician services. It threatens to impose a 24.4% decrease in the Medicare physician fee schedule on April 1, 2014, if not fixed. The Bipartisan Budget Act of 2013 (2), which was signed into law by President Obama on December 26, 2013, provided a reprieve for 3 months, delaying the cuts to April 1, 2014, included the pathway for SGR Reform Act of 2013. The Bipartisan Budget Act of 2013 establishing the federal budget targets for fiscal years 2014 and 2015 includes a number of provisions impacting Medicare and Medicaid programs (3). While the act provides a short-term reprieve from a looming Medicare physician fee schedule cut, it also extended Medicare provider payment cuts under existing sequestration authority for 2 years and it makes a variety of other policy changes. It is expected that the 3-month payment patch will give Congress time to repeal the SGR with a 0.5% increase for services provided. Congress has been focusing on permanent repeal of the dysfunctional SGR formula throughout 2013; however, it failed to happen in 2013. After numerous attempts to fix the physician payment system with multiple modifications which have been judged to be failures, in 1998, the physician payment updates were replaced by a new mechanism – the SGR formula (4). The consequences of this formula have been problematic from soon after its enactment. The dual goals of policy makers in creating the SGR mechanism was to ensure adequate access to physician services and to control federal spending in a more predictable way than previous mechanisms allowed, continues to fail and create new problems each year. Recently, Wilensky (5) has described that the use of a relative-value scale with fees adjusted according to the SGR is inconsistent with a renewed interest in value creation in health care. She described that a fee schedule that reimburses physicians on the basis of billing for approximately 8,000 discrete service codes makes it very difficult to hold physicians responsible or accountable for the health outcomes of their patients or for the costs of treating them (5). In addition, the incentives that the SGR presents to the individual physician are incompatible with the formula’s objective of controlling aggregate physician spending. While the aggregate spending of all physicians’ drives the SGR, no one physician or physician group is large enough to affect aggregate spending. Thus, stellar performance can’t be rewarded and poor performance can’t be penalized at the level of the physician or the group associated with the good or bad behavior (5). An increase in the volume of services that are provided has accounted for most of the increases in physician spending over the past decade (Fig. 1) (5). While the Medicare Economic Index (MEI) increased moderately, spending for