The Medicare Payment Advisory Commission (MedPAC) has officially endorsed the repeal of the sustainable growth rate (SGR) formula, which determines physician payments from Medicare, in hopes of replacing it with a 10-year fixed rate for primary care physicians and cuts in payments to specialists.

The proposal was originally presented by the MedPAC staff at the commission’s meeting in September. Payments to primary care physicians would freeze for 10 years; specialist payments would be reduced by 5.9% per year for 3 years and then frozen.

The SGR formula connects physician reimbursement rates to increases in the gross domestic product (GDP). Since spending on physician services has outpaced increases in the GDP, the SGR formula required cuts to be made in reimbursements each year over the past decade.  However, Congress has always postponed those cuts.

Come January 1, an SGR-triggered pay cut of 30% in physician reimbursement is scheduled—a price too high to sustain physician participation in Medicare, particularly primary care providers. As a result, cuts were recommended only for specialty providers, while freezing reimbursement rates for primary care physicians.

The endorsed plan to repeal the SGR formula will cost around $200 billion; MedPAC has developed strategies to pay for it. The proposal will reach Congress later in October. If Congress doesn’t act on the plan or develop an alternative before the first of the year, a 30% cut in Medicare payments mandated by the SGR will be implemented across the board for all providers.

Physician’s Weekly wants to know…

  • Do you think the repeal fixes the crisis — or only creates a new one?
  • Will this have an effect on the already growing rift between primary care providers and specialists?