Fix Health Care Policy

How to Fix the Medicare Physician Payment Problem

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The congressional formula that determines the annual Medicare payment update for physicians, the sustainable growth rate (SGR), was supposed to cut Medicare doctors’ pay each year starting in 2002. But that congressional formula is so flawed and unworkable that every year since 2003, Congress has stepped in to stop it from going into effect. In 2013, without another congressional “doc fix,” the physicians would have had a pay cut of 26.5 percent.

The formula is called the sustainable growth rate because it links Medicare physician pay increases to the performance of the general economy, not to the market-based conditions of supply and demand that would determine the price of medical services. So if Medicare physcians’ pay in any given year rises faster than economic growth, then their pay is automatically reduced the following year.

There’s an added dimension to this problem: Every year the pay cut is delayed, the size of the cut the following year is bigger.

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Tags: doc fix, flawed, Medicare, pay increase, performance, premium support, SGR, Sustainable Growth Rate, unworkable