A Successful Landing for Permanent SGR Reform

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

Bipartisanship is not dead in the United States, and that is good news for physicians as well as Medicare beneficiaries. Building on bipartisan and bicameral support of sustainable growth rate (SGR) reform proposals that emerged at the end of 2013 and again in 2014, on Mar. 26, 2015, the House of Representatives voted overwhelmingly—392-37, with support from 212 Republicans and 180 Democrats—to pass H.R. 2, The Medicare Access and CHIP Reauthorization Act of 2015, also known as “MACRA.” Then on April 14, two days after returning from its spring recess, the Senate passed the legislation in a similarly overwhelming manner, 92-8, and a couple of days later, President Barack Obama signed MACRA into law. Thus came to an end an unpopular legislative provision that had been worked around repeatedly since 2003.

For long-time SGR critics, the passage of MACRA elicited the same kind of feeling of relief one experiences at the end of a long plane flight, when the plane’s wheels finally touch down on the tarmac.

Enacted as part of the Balanced Budget Act of 1997, the SGR formula incorporated medical inflation, the projected growth of per capita gross domestic product, forecasted growth in the number of Medicare beneficiaries, and changes in law or regulation.

The SGR required Medicare each year to set a total budget for spending on physician services for the following year. It also sought to enforce long-term fiscal accountability. If actual spending was higher than the annual budget, the Medicare conversion factor that is applied to more than 7,400 covered physician and therapy services in subsequent years was to be reduced so that over time, cumulative actual spending would not exceed cumulative budgeted (targeted) spending, with Apr. 1, 1996, as the starting point for both.

Partially because of the effective lobbying efforts of physicians, Congress temporarily suspended application of the SGR by passing legislative overrides or “doc fixes” 17 times from 2003 to 2014. As a result, actual spending exceeded budget every year during those years. Because the annual fee update had to be adjusted not only for the prior year’s variance between budgeted and actual spending but also for the cumulative variance since 1996, the next proposed update, effective Apr. 1, 2015, (but in practical terms implemented in the latter half of the month), would have been a dramatic reduction in Medicare physician fees of 21.2 percent.

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