Health Professional Groups Propose SGR Repeal, Alternatives

Some of the nation's largest health care professional organizations plan to send a proposal to Congress asking lawmakers to phase in a repeal of Medicare's sustainable growth rate, or SGR, formula by 2016 if Congress cannot immediately eliminate the current physician payment system.

The proposal, which is endorsed by the AAFP, the AMA and 84 other health care professional organizations, calls on Congress to enact legislation immediately repealing the SGR, which is used to determine annual Medicare payment rates. If Congress is unable to eliminate the SGR immediately, however, the proposal asks legislators to establish a pathway that leads to the "complete elimination" of the SGR by 2016.

The proposal, which will be delivered to House and Senate committee members within the next few weeks, will serve as a framework for developing legislation that eliminates the SGR, said Kevin Burke, director of the AAFP Division of Government Relations. Although the ultimate goal of the AAFP and the other organizations is the immediate repeal of the SGR, that may not be economically feasible, said Burke. Immediate repeal of the SGR could cost as much as $318 billion, according to the Congressional Budget Office. As a result, the proposal represents a compromise and recognition of budget constraints that could postpone the elimination of the SGR for several years.

The SGR determines annual Medicare reimbursement rates using a formula that aligns actual spending rates with specified targets. During the past few years, spending has exceeded targeted rates, triggering steep reductions in physician payments. Those reductions have been averted at the last minute by congressional action, but without intercession, the SGR is projected to cause a 40 percent reduction in physician payment rates during the next eight years, including a 9.9 percent reduction in 2008.

AAFP Board Chair Larry Fields, M.D., of Flatwoods, Ky., said Congress needs to create a "stable payment system" for the next few years while working on a "permanent fix for the broken system we have now." This includes incorporating a patient-centered medical home in Medicare, said Fields in an interview with AAFP News Now.

The proposal attempts to mitigate physician losses by asking Congress to set positive Medicare update rates each year until the SGR is repealed and to stabilize payments for at least two years by providing positive baseline updates to all physicians. At the same time, the proposal urges the Bush administration to remove physician-administered drugs from the SGR and to make other formula adjustments to help offset the cost of congressional action.

Under the proposal, payment updates for 2008 and 2009 would be equal to the projected rate of increase in the Medicare economic index, or MEI. The Medicare Payment Advisory Commission, or MedPAC, has recommended an update of 1.7 percent in 2008. From 2010 to 2015, annual statutory updates would be established based on the projected growth of the MEI.

With the repeal of the SGR in 2016, the proposal asks Congress to then begin determining physician payment updates using the same prospective payment system used for hospitals and nursing homes, which relies on recommendations put forth by MedPAC.

The proposal also contains a medical home provision, which was included at the behest of the AAFP, the American College of Physicians and the American Osteopathic Association. According to the proposal, physicians and other health care professionals should have the opportunity to participate in care coordination and quality improvement programs and should share in the savings resulting from these efforts.