The SGR formula was created in 1997 as part of a deficit reduction law that called for setting Medicare physician payment rates through a formula based on economic growth. By 2002, Medicare expenditures began to exceed the target, which created a 4.8 percent pay cut. Every year since, Congress has enacted “fixes” that have either been small increases or freezes.
For 2012, Congress passed and President Obama signed legislation into law on December 23, 2011 that deferred until the end of February a scheduled 27 percent Medicare pay cut for physicians. Congress again passed and President Obama signed legislation into law on February 24, 2012 that defers a scheduled 27 percent Medicare pay cut for physicians until the end of 2012. This is the 14th time that Congress has passed short term fixes to Medicare physician payment.
The Medicare Payment Advisory Commission (MedPAC) recommended in its March 2012 report to Congress that the SGR formula should be repealed. However, MedPAC also recommended three years of 5.9 percent Medicare pay cuts for specialists followed by seven years of freezes to help pay for the repeal, with 10 years of freezes for primary care physicians as a partial payment for repeal.
Staff of the House Energy and Commerce Committee and Ways and Means Committee are working on a permanent solution to the SGR formula and involving physician societies in the process.
SVS will continue to be involved with Congress in creating a permanent solution to the flawed SGR formula that determines Medicare pay for physicians. If Congress continues to enact one year freezes, the cut will increase dramatically from $22 billion this year to $92 billion in five years. We commend the House committees for working on a permanent solution and appreciate being part of the process.
With operations winding down in Iraq and Afghanistan, SVS supports using the Overseas Contingency Operations discretionary funds as the offset for the $300 billion over 10 years it is estimated to cost for SGR repeal. In five years, the cost jumps to $600 billion over 10 years if this problem is not quickly solved by Congress.
Finally, we oppose MedPAC’s recommendation on how to pay for SGR repeal, which would have a disproportionate impact on specialists such as vascular surgeons.