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The SGR: What Happens in Washington, D.C. Now Could Affect the Rest of Your Career

If you’ve happened across any political news outlets in the past month or two you may have seen some headlines about something called “SGR.” Perhaps more likely, you may remember in years past hearing political pundits or reporters talking about a “doc fix.” In fact, both of these are the same thing, and if you’ve heard those terms thrown about more than once it might be because the issue has come up at least once a year since the SGR was implemented in 1997.

So what is the SGR and why should you care? SGR stands for “sustainable growth rate,” and in short, it is the formula that the federal government uses to decide how much to pay doctors for treating patients insured through Medicare. In other words, the elderly and the chronically disabled, a huge chunk of the patient population in the United States.

What the SGR is supposed to do is match Medicare payments to economic growth and other factors to determine how much to pay doctors for the following year.  While it worked for a couple of years, since 2002 it has been drastically underestimating the cost of providing care as the economic assumptions that went into designing the formula have diverged from the real world economy. To compensate, Congress began an annual tradition of passing a “doc fix” bill at the end of each fiscal year, which bridged the gap between the formula and reality, essentially giving Congress permission to continue to pay physicians appropriate rates for seeing Medicare patients.

While in 2002 the difference between the SGR and reality was 4.8% of Medicare payments, that number has grown every year since, up to a whopping 26.5% in the “doc fix” passed last year. As a result, physicians across the country have had to make decisions about staffing, patient volume, new equipment, and all their other business concerns with the possibility of a massive, arbitrary pay cut hanging over their heads.

Were this pay cut to ever go through the results would be catastrophic, but even the threat has a number of deleterious effects on physician practices and patient access to care: doctors accepting fewer Medicare patients to insulate themselves against eventual cuts, doctors freezing their staff hiring or downsizing out of fear of cuts, doctors retiring early so as not to deal with the whole headache at all and even some doctors whose practices fail and go out of business without a reliable revenue stream to count on.

So far, Congress has managed to either “patch” the SGR in time, or if late, has gone back and retroactively fixed payments.  However, in an increasingly divided and dysfunctional era of Congress, there is no guarantee that this trend will continue, and in the meanwhile an industry that constitutes almost one-fifth of the US economy is essentially being held hostage.

Remarkably, SGR is widely understood on both sides of the political spectrum to be in need of repair. The sticking point, perhaps unsurprisingly, is cost.  Fixing costs for the next ten years — that is, not allowing them to increase with inflation or economic growth, but just keeping them from decreasing — is projected to cost $138 billion. In a political climate where the watchword is financial responsibility, this is understandably a hard number to sell to legislators.

So why the urgency to fix SGR right now? Well, there are two important factors at play that make now the time to act. First, there is that $138 billion number.  While it seems like a lot — and it is — it actually represents an enormous discount on the price to fix SGR. The projected cost of a 10-year fix has gone up every year since 2002 as the difference between the SGR and reality has grown, peaking at a price tag of $316 billion in January of 2012. But over the last two years this number has gone down as some trends in health care have reversed and the Congressional Budget Office — a trusted, impartial source of projections such as these — has revised their estimates. As a result, fixing SGR now is an easier sell to legislators from a financial perspective than it has been in years.

The second factor is momentum. There are two companion bills in Congress right now, H.R. 4015 in the House of Representatives and S. 2000 in the Senate, which have cleared committees and are potentially headed for a vote.  If you remember from your high school civics class, that means that if both are passed, they head to the White House for a signature and then become law. The bills would repeal SGR and replace it with fixed fees through 2018, and then allow for a new system to be implemented after that.

The new system, although still being decided , is likely to tie up to 10% of physicians’ Medicare payments to specific quality measures. While the Department of Health and Human Services has until May 2015 to lay out their plan for determining what those quality measures will be, in theory the “best” doctors would get 110% payments and the “worst” would get 90%. Should SGR be successfully repealed, of course, the determination of these quality measurements will be the next important debate.

The current “doc fix” expires on April 1st, meaning legislators have only about a month to vote on the two bills before Congress. Whether Congress passes these two bills, reinstates a temporary fix, or pursues some third option, these actions will undoubtedly affect how our entire generation of physicians practices medicine. This moment of change has been in the making since 1997, and as medical students we cannot wait until we are practicing doctors to pay attention to this issue. If we miss this window to have our voices heard and we do not like the result, it could easily be another 20 years or more before the opportunity for change arises again.

The most important thing you can do right now is make your voice heard.  Regardless of your political leaning, call up your legislator during the month of March and tell them: “I am a medical student, and I am worried that if SGR is not repealed it could damage my future ability to run a successful medical practice and serve Medicare patients.” Tell them your story; there is a popular perception that legislators in Washington are deaf to the pleas of ordinary people, but that could not be farther from the truth. They crave input from their constituents, and if they don’t hear from you they have no other perspective to go on then that of the special interest groups that are invested in the status quo.

All the pomp and circumstance and political fighting aside, just about every legislator in Washington goes there to make the world a better place for the people they represent, even if they disagree on how best to do that. Call them up, tell them your story and the change you would like to see, and help shape the future of American health care before it is too late.

Mark Kashtan Mark Kashtan (3 Posts)

Contributing Writer Emeritus

Medical College of Wisconsin

Mark was born and raised in Sacramento, California and grew up backpacking in the High Sierras, a place from which he still draws inspiration. He attended college at UC Berkeley before heading east to study medicine at the Medical College of Wisconsin. He has an older brother, also in medicine, and two dogs that live back home with his parents, a retired vascular surgeon and registered nurse. He wants to be a pediatric surgeon when he grows up.