The End of the Sustainable Growth Rate (SGR)?

by David Gimlett, M.D.

It is well recognized that the Medicare system for determining physician compensation has played a major role in increasing costs and minimizing primary care and the quality of care in the United States. The RBRVS (Resource Based Relative Value Scale) and SGR (Sustainable Growth Rate) apply to Medicare payments but they also determine the bases used by private insurance plans. Recent articles have well described how the RBRVS system has distorted physician payments away from primary care and to the benefit of specialist dominated procedural medicine. Never mind that the RBRVS is an invention of the specialist dominated American Medical Association.

Congress has been procrastinating since it first started postponing fee cuts in 2003.  The RBRVS essentially determines how medical payments are going to be apportioned out. The SGR is a method of putting a total cap on physician payments for the following year. If the growth in total spending physician services exceeds the target amount then fees for the following year are supposed to be reduced. The ten-year average annual percentage change in per capita real gross domestic product (GDP) is used as a target percentage. Every year spending has exceeded the target and every year congress has put a hold on the required cuts.  But the cuts have still been in the budget, accumulating every year. If the SGR law is repealed and fees frozen for 10 years it will set the budget back by $139 Billion.

The SGR always has been a blunt instrument to achieve medical cost control. Primary care, which has already been underfunded by the RBRVS, is essentially paid on the basis of the number of office visits. Since primary physicians are already working full time with full schedules they can not increase their billings in spite of an ever increasing office overhead. The only effective way to mitigate the damage is to see fewer and fewer Medicare and Medicaid patients.  Procedural specialists, on the other, can always do one more expensive procedure a day.

Now that Congress is opening its sleepy eyes to the problem we are hearing various solutions proposed including the recent draft legislation from the health subcommittee of the House Energy & Commerce Committee.  This plan repeals SGR and allows .5% per year increases in payments for the following 10 years. The first 5 years are to be spent preparing alternatives for phasing out fee for services such as accountable care organizations, medical homes, and bundled-payment programs.  The plan does offer extra pay after two years for care coordination to physicians who are in a medical home organization. No one has explained how rural and small practice suburban physicians can be folded in to those kinds of programs. Physicians who remain in fee for service will be severely limited in their ability to keep up with inflation without divesting themselves of their Medicare practices.

Nowhere in the proposed legislation is there any provision for correcting the imbalance of payments received for primary care.  Another five years of exodus of family physicians from the practice of medicine and diversion of medical students to high income specialty training will leave us with a shortage of primary care physicians far greater that the 52,000 predicted for the year 2025. It would be a better solution if the legislation could include mandates for establishing a separate, higher conversion factor for primary care.  Also, the entire RBRVS should be audited and corrected.

However, the bottom line is that band-aid changes to our health care system can’t work and probably will cause more problems.  What is needed is a single payer system which has the mass and the muscle to address all of the problems at once. This should be created before our medical infrastructure is destroyed by the politicians and the incrementalists.


Suggested Reading:

(1) Will Anyone Listen When Former CMS Chiefs Call ForMore Objective Physician Payment?

Posted on July 7, 2012 by Brian Klepper 

(2)  Report ofthe National Commission on Physician Payment Reform, March,2013

(3)  The Washington Post How a secretive panel uses data that distort doctors’ pay By Peter Whoriskey and Dan Keating, Published: July 20,2013


(5)  Moving Forward from the Sustainable Growth Rate (SGR) System. Medicare Payment Advisory Commission, May 14, 2013.

TAGS: ACA access to care Accountable Care Act Accountable Care Act (ACA) Affordable Care Act Affordable Health Care Cost of Illegal Immigration David M. Gimlett Don McCanne M.D. Employee Medical Benefit Employers Medical Coverage employer-sponsored health insurance Fee-for-service (FFS)