Congressional Leaders Agree to Repeal SGR and Increase Physician Pay

Physicians will see a 0.5 percent increase in payments provided for services to Medicare beneficiaries in each of the next 5 years, according to an agreement reached by the chairman of several Senate and House of Representative Committees. The agreement, which will be in a bill introduced in both the Senate and the House of Representatives, will repeal the Sustainable Growth Rate (SGR) formula which has been used since 1999 to update the amount that physicians are paid. The SGR would have resulted in a reduction in physician reimbursement every year since 2002. During the five year period following adoption of the legislation, a new method for reimbursing physicians will be finalized, one that will make payments based more on value of care received instead of just reimbursing for services provided.


The payment system will provide a 5 percent bonus to providers who receive a significant portion of their revenue from an alternative payment model (APM) or for care provided under a patient centered medical home, according to a summary of the agreement released by the House’s Committee on Energy and Commerce. By 2018-2019, physicians and other providers reimbursed under the physician fee schedule will have to receive at least 25 percent of their reimbursement through an APM. The required percentage of care to be provided under an APM will increase over time. A technical advisory committee will be established to review and recommend physician-developed APMs based on criteria developed through an open comment process.

Three existing quality programs would be combined into one program that rewards providers who meet performance thresholds and who improve the care for seniors. Physician quality and utilization data will be posted on the Physician Compare website. Claims data will be provided to qualified organizations to review the provision of existing care and to recommend ways to improve quality. Data will be released in conformance with existing privacy and security laws.

Congressional Support

The plan has met with begrudging approval from the House GOP Doctors’ Caucus. Rep. Phil Gingrey (R–Ga.), co-chair of the Doctors Caucus said, “please don’t say we got what we wanted because what we wanted was a 10-year update of a half of a percent, which doesn’t even keep up with inflation,” according to a report in Politico. “We have a real opportunity to repeal the SGR once and for all and to provide seniors, and the doctors who care for them some, much needed certainty,” according to a statement from Representative Dave Camp (R–Mich.) who is Chairman of the House Ways and Means Committee. The bill is supported by Senate Finance Committee Chairman Max Baucus (D-Mont.), Senate Finance Committee Ranking Member Orrin Hatch (R-Utah), House Ways and Means Committee Ranking Member Sander Levin (D-Mich.), House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and House Energy and Commerce Committee Ranking Member Henry A. Waxman (D-Calif.)

The agreement still has to pass both houses of Congress. It combines elements from bills already approved by the Senate’s Finance Committee and the House’s Ways and Means Committee. The annual 0.5 percent update for five years was discussed by former CMS administrators at a conference earlier in 2014 as a way of keeping down the cost of replacing the SGR system. A report from the Congressional Budget Office estimated that a 10 year repeal of the SGR with small annual increases could cost as much as $150 billion. The former CMS administrators thought that if that number was cut in half, passing a repeal of the SGR would not be so difficult. Representative Levin said, “we now have to turn to the thorny issue of offsets.” He continued, “I look forward to working with my colleagues and incoming Finance Chairman Ron Wyden to send a complete package to the President’s desk before March 31.”


On March 31st, 2014, the current repeal of the SGR expires and payments to physicians for services provided on April 1st and after will be reduced by 24 percent. Congress has repealed the implementation of the update from the SGR for the last 12 years as each time it would have resulted in a payment reduction and in some years a substantial payment reduction for physicians. The SGR was designed as a mechanism for adjusting the total growth in spending on physician services. The SGR is linked to changes in the U.S. gross domestic product (GDP). It is based on a formula at Soc. Sec. Act sec. 1848 (f)(2) that includes the following factors; (1) the estimated weighted average percentage increase in the fees for all physicians’ services; (2) the estimated percentage change in the average number of Part B beneficiaries from the previous year; (3) the estimated percentage growth in the real per capita GDP from the previous year; and (4) the estimated percentage change in expenditures for all physicians’ services that are attributable to changes in laws and regulations.