Dump -- don't expand -- the SGR

The Medicare Payment Advisory Commission has offered two paths to reforming Medicare physician payment, but only one is viable.

Editorial. April 2, 2007.

There is a flip side to the popular adage, "If it ain't broke, don't fix it." It applies to the sustainable growth rate formula that helps determine Medicare physician reimbursement. This system is broke, so let's fix it.

Recognizing the SGR's flaws, Congress, in the 2005 Deficit Reduction Act, required the Medicare Payment Advisory Commission to come up with alternatives. Panel members couldn't agree on just one option, so last month they delivered to lawmakers a report outlining two paths.

The first is for Congress to repeal the formula and "accelerate development and adoption of approaches for physicians ... to furnish lower-cost and higher-quality care." The second is to keep an expenditure target but apply it not just to physicians but also to all Medicare players.

Dumping the dysfunctional SGR and developing a new system that adequately reflects physician practice cost increases is the only real solution. The American Medical Association has advocated this move for years. It strongly opposes expanding the broken formula or imposing any new spending target.

The reasons are many. Targets such as the sustainable growth rate, which results in cuts to physicians' base pay if the expenditure target is exceeded, are a blunt weapon. The SGR penalizes all doctors, regardless of whether they provide care efficiently.

The system is based on the impossible notion that doctors alone can control the utilization of services. This ignores an aging population, the increased prevalence of chronic conditions, government benefit expansions and technological advances.