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February 14, 2018

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SGR Formula Is Repealed

April 24, 2015:

Say good-bye to the yearly cycle of alarm at cuts in Medicare reimbursement to providers, followed by relief as Congress overrides the negative payment update. On April 16, 2015, President Obama signed the Medicare Access and CHIP Reauthorization Act, which, among other things, repeals the formula for the Medicare sustainable growth rate (SGR).

The SGR, which was instituted in 1997, was meant to ensure that the growth in Medicare’s per beneficiary payment did not exceed the growth in gross domestic product. What has resulted every year since 2002 is a conversion factor to the Medicare physician fee schedule that reduced payment to physicians. Well-founded concern that such cuts would deter providers from serving Medicare patients would then prompt Congress to discard the calculations and institute a small payment increase. This annual legislative work-around came to be called the “doc fix.”

Every time the update was fixed, the reduction was merely added to the following year’s calculation. This means that, were the SGR allowed to go into effect as calculated, physician payment would be reduced by a whopping 21 percent. Repeal of the SGR guarantees that this will not happen.


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