NCPA - National Center for Policy Analysis

Medicare Sustainable Growth Rate: Repeal It Now

March 19, 2015

The Medicare Sustainable Growth Rate (SGR) formula was passed as part of the Balanced Budget Act of 1997 to reduce the growth in Medicare spending. The so-called SGR was designed to collectively penalize physicians for exceeding the benchmark expenditures established by Congress. The SGR automatically reduces physician payments under Medicare by a proportion that will lower spending back to the designated growth rate.

However, the SGR has not reduced spending primarily because Congress has continually postponed the cuts year after year rather than reform Medicare in sustainable ways.

  • Since 2003, Congress has postponed the cuts 17 times.
  • Beginning in April, physician fees will be cut by 21.2 percent if Congress does not kick this can down the road an 18th time.
  • Congress has not repealed the SGR mostly because it would cost $140 billion over 10 years and require offsets.

The SGR clearly is not working; the reason Congress will not allow the cuts to take place is because too many seniors would lose access to physicians willing to treat them. What is needed is fundamental reform. But a good first step down that road would be to repeal the SGR and pay for it with several costly offsets.

Two good ideas President Obama has supported in the past include:

  • Reducing the percentage of Medicaid provider taxes that states are allowed to use to qualify for a federal match;
  • And eliminating some of the Medigap Supplemental Plans that everyone agrees leads wasteful spending.

This is just the low-hanging fruit. These simple fixes must accompany fundamental reform.

Source: Devon Herrick, "Paying for the Medicare 'Doc Fix,'" National Center for Policy Analysis, March 18, 2015. 


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