San Francisco Marin Medical Society Blog

Obama’s New Fiscal Cliff Offer Proposes Repeal of SGR

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In the White House’s latest “fiscal cliff” offer to House Speaker John Boehner, President Obama proposed a permanent repeal of Medicare’s sustainable growth rate (SGR) alongside $400 billion health care savings, according to a source familiar with the talks.

A permanent fix would come with a $245 billion price tag and it’s still unclear how—or if—Congress would pay for a policy meant to stabilize doctor salaries. 

SGR is the formula that determines how much Medicare providers get paid, by tethering their salaries to overall growth in the economy. This formula has, for a decade now, always fallen short of keeping doctor salaries stable. This year, if we stuck to what the sustainable growth rate says doctors should be paid, physicians would end up taking a 26.5% pay cut. 

That has meant that, year after year, Congress has had to pass a “doc-fix:” A short term funding patch to make up the difference between what the formula says doctors should get paid, and what it would take to keep their salaries stable. It’s become somewhat of a tradition, where Congress scrapes together small cuts from other programs to pay for the fix.

If the White House does indeed succeed in eliminating the sustainable growth rate, it would presumably need to find $245 billion to pay for the provision. It would also need to settle on a new formula to calculate what Medicare ought to pay doctors for each surgery they perform and medication they prescribe.

MedPac, a non-partisan body that advises Congress on Medicare policy, has its own preferred option. It has recommended that if Congress repeals the sustainable growth rate, it should continue to hold primary care doctor payments steady. At the same time, specialty doctors would see a haircut in their services for three years, and then see their rates freeze as well. 

Source: Washington Post, Wonkblog, December 18, 2012