Repealing Sustainable Growth Rate Would Cost $138 Billion Over 10 Years

Tony Berberabe, MPH @OncBiz_Wiz
Published: Tuesday, Mar 04, 2014

Repealing the sustainable growth rate (SGR) formula, a mechanism Congress enacted in 1997 to limit Medicare costs, is going to leave taxpayers with a bill of $60 billion from 2014 through 2019, and a total of $138 billion through 2024. These details were highlighted in a letter sent from Douglas Elmendorf, the Congressional Budget Office Director to Sen. Ron Wyden (D-Oregon), who is chair of the Finance Committee.

In the letter, Elmendorf says the annual additional outlays would be $5.3 billion in 2014 if adopted mid-year, reach $10.6 billion in 2015, and would mostly rise annually, reaching a maximum outlay of $17.4 billion in 2023.

The proposed SGR formula fix, HR 4015, would reward physicians based on the quality and efficiency of their work. It’s hoped that the fix would motivate physicians to abandon the conventional Medicare payment system (fee for service) in favor of alternative reimbursement models that encourage physicians to deliver better results at lower costs.

The bill would maintain payment rates at the current level for services on the physician fee schedule for the rest of calendar year 2014 and increase Medicare’s payment rates for services on the physician fee schedule by 0.5 percent a year for services furnished during calendar years 2015 through 2018.

Physician payments would remain at the 2018 rate through 2023, but individual physicians would be paid through one of two mechanisms, depending on whether the physician chose to participate in a Merit-Based Incentive Payment System (MIPS) or an Alternative Payment Model (APM) program.

After 2024, physicians who chose the MIPS program would see payment rates increased each year by 0.5%. Physicians in this program would be subject to positive or negative performance adjustments. Those choosing the APM program would receive payment rates increased each year by 1%. From 2018 through 2023, these physicians would receive a lump-sum payment equal to 5% of their Medicare payments in the prior year for services paid according to the physician fee schedule.

By Fiscal Year, in Bilions of Dollars

  2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014-2019 2014-2024
Changes in Direct Spending
Estimated Budget Authority 5.3 10.6 11.2 10.7 10.7 11.7 13.4 14.7 16.6 17.4 16.1 60.2 138.4
Estimated Outlays 5.3 10.6 11.2 10.7 10.7 11.7 13.4 14.7 16.6 17.4 16.1 60.2 138.4

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