Medicare Sustainable Growth Rate (SGR)


The Medicare Sustainable Growth Rate (SGR) system was put into place as a result of the Balanced Budget Act of 1997, and serves as a means for the Centers for Medicare and Medicaid Services (CMS) to regulate spending on Medicare physician services. Each year, CMS develops a report on the previous year’s spending, and Congress adjusts the payment rates for Medicare physicians accordingly. For the past several years, the formula used as part of the SGR system has recommended that payments for Medicare physicians be cut drastically. If this were to happen, many physicians would be forced to leave the Medicare system, causing a large gap in patient care. To avoid this situation, Congress has stepped in with temporary fixes to avoid these cuts; however, a permanent fix has yet to be determined.

On January 1, 2013, Congress passed H.R. 8, the American Taxpayer Relief Act of 2012.  This legislation avoided the across-the-board tax increases that were set to take effect January 1, 2013 as well as blocking the scheduled 26.5% cut in reimbursements for Medicare physicians for one year.  One July 24, 2013, Congressman Michael Burgess (R-TX) introduced H.R. 2810, the Medicare Patient Access and Quality Improvement Act of 2013, which would repeal the SGR at the cost of $139 billion, according to the Congressional Budget Office (CBO). However, in September a new CBO report updated the cost to $175 billion, 26 percent more than was initially estimated.

On December 26, 2013, President Obama signed H. J. Res 59, the bipartisan budget agreement, into law. The budget agreement includes a three-month Sustainable Growth Rate (SGR) patch, which will postpone a cut in Medicare pay for physicians from January 1 until April 1 and instead provide a temporary 0.5 percent SGR update.

On February 6, 2014, Congressional leaders introduced a bipartisan, bicameral bill that would replace the current Medicare Sustainable Growth Rate (SGR) formula. This new system, introduced jointly by the Senate Finance Committee, House Ways & Means Committee, and House Energy & Commerce Committee, would be based on quality and efficiency. However, the SGR Repeal and Medicare Provider Payment Modernization Act of 2014, which was introduced in the House by Rep. Michael Burgess (R-TX) as H.R. 4015 and in the Senate by Senator Max Baucus (D-MT) as S. 2000, does not include a list of financial offsets. However, disagreements over pay-fors stalled progress.

On March 14, 2014, House Republicans passed H.R. 4015, which was amended to fund the bill by delaying the Affordable Care Act’s individual mandate provision for five years. President Obama and Senate Majority Leader Harry Reid (D-NV) stated that legislation with that provision will not pass the Democratic-controlled Senate. Conversely, the Senate began working on a S. 2110, version of the SGR legislation that would cost $180.2 billion over 10 years due to the additional cost of extending other health programs set to expire.

Two new bills were introduced in the late evening of March 25. Senator Ron Wyden (D-OR), the newly appointed Chair of the Senate Finance Committee, introduced S. 2157, the Commonsense Medicare SGR Repeal and Beneficiary Access Improvement Act of 2014. This bill would use Overseas Contingency Operations (OCO) funds as an offset to pay of the SGR repeal. Additionally, House Republicans have introduced H.R. 4302, a year-long SGR patch, that would expire on March 31, 2015.

Current Status

On March 27, 2014 the House passed H.R. 4302 by voice vote and on March 31, the Senate pass the legislation as well. President Obama then signed the bill into law on April 1, 2014.

This legislation made permanent changes to how physicians who perform advanced imaging services are paid by connecting it to appropriate use criteria. These permanent changes were included as part of the temporary one year patch to the Sustainable Growth Rate system.

These changes state that Secretary of Health and Human Services must launch (by 2017) a program that encourages the use of AUCs for advanced diagnostic imaging services (ADIS). Additionally, no later than November 15, 2015, the Secretary, in consultation with stakeholders, will choose which AUCs will be included in the program.