House, Senate Introduce Bills to Fix SGR

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The agreement would put an end to 17 straight fixes to the sustainable growth rate that have not found a permanent solution for addressing the Medicare cost cuts envisioned in the original legislation.

Leaders in Congress today reached a bipartisan, bicameral deal to permanently repeal Medicare's sustainable growth-rate formula for paying physicians, and both houses introduced bills detailing the terms.

If enacted, the legislation would eliminate a long-running source of frustration and fiscal uncertainty for both physicians and federal budget watchers, one that made it hard for medical practices to plan ahead and for the healthcare system to move away from a fee-for-service system to one that rewards value.


Congress has passed 17 consecutive short-term fixes dating back more than a decade. A vote is anticipated next week ahead of an April 1 deadline, after which doctors would face a 21.2% cut in payments. House Speaker John Boehner, R-Ohio, and House Minority Leader Nancy Pelosi, D-California, have reportedly been working on an agreement for weeks, which is reportedly worth $213 billion, offset by $70 billion in cuts elswhere in Medicare and in provider payments.

The problem with SGR dates to 1997, when Congress created the formula in an effort to control spending. The formula was supposed to set realistic yearly and cumulative spending targets; if the cost of care exceeded the target in any given year, rates would be cut the following year to make up the difference. However, spending targets were unrealistic from the start and gaps between targets and actual costs emerged quickly. To create a permanent fix, Congress must eventually find funding to close the entire gap.

An announcement of the deal came from the House of Representatives, which said the proposal will:

  • Repeal the SGR and end the annual threat to seniors’ care, while instituting a 0.5% payment update each year for five years.
  • Improve the fee-for-service system by streamlining Medicare’s existing web of quality programs into one value-based performance program. It increases payment accuracy and encourages physicians to adopt proven practices.
  • Incentivize the use of alternative payment models to encourage doctors and providers to focus more on coordination and prevention to improve quality and reduce costs.
  • Make Medicare more transparent by giving patients more access to information and supplying doctors with data they can use to improve care.

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