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April 18, 2014

Dewonkify – SGR

Word:  Sustainable Growth Rate (SGR)

Definition:  The Sustainable Growth Rate is a formula that is supposed to be utilized to determine Medicare Part B payment rates for physicians and other health professionals.

Used in a sentence:   Medicare SGR sticker shock adds urgency to pay reform campaign

History:  In 1997, Congress created the SGR formula in order to help limit spending on Medicare physicians’ services.  Since 2002, what Medicare spends on physician services has exceeded a SGR formula cap, so physicians have faced payment cuts (also called negative updates).  However, for the past decade, Congress has passed a series of short-term fixes (14 of them) to prevent the cuts from taking place, having to find other health care savings to offset the cost of fixing the physician cuts.

What’s the problem?  Unless Congress passes another short-term or a longer-term fix to the SGR before the end of 2012, physicians who treat Medicare beneficiaries will face a 26.5 percent cut in their reimbursement.  Such a cut would go into effect in January 2013.

Correcting the formula is not an easy task.  The Congressional Budget Office estimates that even a one-year fix costs about $25 billion, and replacing the formula can cost as much as $376 billion over 10 years.  Congress has yet to pass legislation addressing a permanent replacement formula for determining Medicare payment rates to physicians and other health professionals.

©2014 Drinker Biddle & Reath LLP. All Rights Reserved

About the Author

Medicare Reimbursement and Health Policy Director

Anna Schwamlein Howard is the Medicare Reimbursement & Health Policy Director in the firm’s Health Government Relations team.

A nationally recognized authority on health care reform issues, Anna has considerable experience in government relations and regulatory affairs. Specifically, she has extensive knowledge with the Medicare Modernization Act, medical privacy and prescription drug issues, Medicare physician payment legislation, the Affordable Care Act, and other federal health issues impacting the lives of older Americans.

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