Medicare Sustainable Growth Rate (SGR) Formula Needs Permanent Reform

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“How many times have we heard this?” asks Alan Weinstock an insurance broker at www.MedicareSupplementPlans.com. “Once again physicians are facing Medicare payment cuts and unless Congress intervenes before June 1, this time the gouge could be over 20 percent.”

According to the American Medical Association (AMA) physicians have faced cuts nine times in seven years. And even though Congress stepped in, much of what they did was funded in ways that merely put the cuts off to a future date instead of correcting the problem. The end result is that Medicare payments to physicians today are only about one percent higher than they were in 2001. So once again it is up to lawmakers to step in and stop a potential 21.2 percent cut.

How the SGR Formula Works – in Theory

The purpose of the Sustainable Growth Rate (SGR) is to act as a cost-control measure on physician services provided under Medicare. It is based on the growth rate of the gross domestic product (GDP). If expenditures exceed the GDP, Medicare then attempts to recoup this money by cutting physician reimbursement.

The problem is that while the SGR traditionally generates cuts and has done so since 2002, Congress has had to step in and halt them because of the number of physicians who threaten to stop seeing Medicare patients if their reimbursement amounts decrease. The end result is that the difference between targeted and actual spending on these Medicare services continues to accumulate. So every year that the pay cuts are postponed, they become larger and larger.

“The problem is that the GDP growth is just not a great benchmark for the SGR,” says Weinstock. “The fact is that running a medical practice grows at a faster rate.”

Fixing the SGR Formula so it Works

Naturally the question that is on most people’s lips is why Congress doesn’t fix the SGR permanently. Most agree that a 21 percent cut in physician payment is truly excessive and would threaten access to medical care for most seniors. However, the experts estimate that a permanent fix could run as much as $245 billion.

Last November, the House passed the Medicare Physician Payment Reform Act that fixes Medicare’s SGR formula and eliminates the accumulated deficit. It replaces the current SGR formula for 2010 with one that is linked to the Medicare Economic Index.

The Medicare Economic Index is the gauge of inflation in physician-practice costs. However, in 2011 the SGR will return to being based on the GDP. Only now it will be split into two service targets -- GDP plus two percent for primary care and preventive services and GDP plus one percent for all other services.

And just this month House leaders discussed a five-year "fix" (California Healthline) which reportedly would increase physicians' Medicare reimbursements by 1% to 2% over the next several years, before a 37% cut to the payments in 2015.

“The fact is that there needs to be permanent reform of this outdated system,” comments Weinstock. “Continually placing doctors and seniors in this tenuous situation is not healthy for anyone.”

Article Source: http://depositarticles.com/

Nancy Emma is the author to this article. She is dedicated to provide information to her clients regarding Medicare supplement plan .

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