The Medicare Sustainable Growth Rate (SGR) is a method currently used by CMS to control spending by Medicare on physician services. Generally, the SGR is a method to ensure that the yearly increase in the expense per Medicare beneficiary does not exceed the growth in GDP. CMS sends a report to the Medicare Payment Advisory Commission (MEDPAC), which advises Congress on the previous year's total expenditures and the target expenditures. The report contains a conversion factor that will change the payments for physician services for the next year in order to match the target SGR. If the spending for the previous year exceeds target spending, then the conversion factor will decrease payments for the next year. If spending is lower than expected, the conversion factor will increase physician payments for the next year.
Maybe this is all coming to an end. According to a March 11 report by The Wall Street Journal, Congressional leaders are discussing ways permanently to end the recurring scramble to avoid mandatory cuts in Medicare payments to physicians set to go into effect March 31.
The elimination of the SGR (referred to in Washington, D.C., as the "Doc Fix") would be a huge step forward. SGR is a cruelly ironic, and frankly absurd misnomer. The term SGR" actually is a business term, loosely meaning the "maximum amount of growth a business can experience without borrowing money to finance growth. In the case of Medicare, the joke lies in the idea that there is any SGR Medicare can sustain before resorting to borrowing — that ship sailed years ago.
According to the Wall Street Journal, many agree the Doc Fix is needed (meaning "politically popular.") No one is sure how to pay for it. Lawmakers would need to agree on a way to offset the cost of eliminating SGR cuts — estimated $175 billion over 10 years.
This time, however, the idea may actually grab traction. The Journal quoted Sen. Ron Wyden (D-Ore.) , the top Democrat on the Senate Finance Committee, as saying, "I've been in Congress long enough to be skeptical of rumors, but what we are hearing from the House suggests there is real movement to fully repeal and replace the flawed formula for paying Medicare providers known as SGR."
Time will tell.