Whither the SGR

The sustainable rate of growth formula has been a political football for almost a decade. The SGR is a statutory formula that is used to annually adjust the reimbursement formula (known as the resource based relative value schedule) that Medicare Part B uses to pay doctors. Every year for the past eight or nine years the SGR has called for a sharp reduction in Medicare payments to doctors, and every year Congress defers the cut which is too painful to doctors and the Medicare beneficiary community. There is a concern that a sharp cut in Medicare reimbursements will cause doctors to leave Medicare in droves and with the looming expansion of the insured population next year that’s a very real threat. There won’t be enough doctors already according to many reports (and common sense).  However, the Washington Post’s Wonkblog recently took the contrary position.

The SGR debate is relevant to the FEHBP because the FEHBP has a large cadre of Medicare eligible annuitant members. FEHB plans pay secondary to Medicare so when Medicare cuts payments, FEHB plans pick up the slack. That would happen for example when the statutory sequestration kicks in on March 1 and cuts Medicare payments to doctors by 2%.  Also pursuant to the FEHBA (5 USC § 8904(b)) fee for service plans pay doctors using Medicare reimbursement rates for annuitants over 65 who have declined Medicare Part B coverage.

The current SGR fix lasts until the end of this year. Medpage Today and the Hill’s Health Watch report on Congressional activity to repeal and replace the SGR this year. The FEHBlog was most intrigued by the AMA News article about how health insurers who are not bound by statutory reimbursement formulas are testing out new approaches such as shared savings, medical homes, and performance contracts. Time will tell.

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