New Report: Why Latest SGR Fix Won’t Work

NEW YORK, NY – Congress is once again squabbling over the “doc fix”—the postponement of cuts to Medicare’s physicians payments—which expires at the end of the month. Congress created a formula known as the Sustainable Growth Rate in 1997 to slow Medicare’s cost growth by tying physician payments to growth in the rest of the economy. The formula is an arbitrary bureaucratic mechanism that often calls for politically unpopular cuts to physician payments. Rather than go through with these cuts, Congress’s approach has been to override them with the so-called “doc fix”—a temporary postponement of the cuts. The latest doc fix expires at the end of this month.

Congress has long recognized the problems with the SGR, and a bipartisan reform plan is expected to be released next week. However, this and other reform plans fail to address the underlying flaw of the SGR formula: bureaucratic price-setting.

In a new report from the Manhattan Institute, Yevgeniy Feyman and Robert Book argue that a truly sustainable Medicare reimbursement system is possible—and the key lies within Medicare itself. They propose using Medicare Advantage as a model for using market prices as a guide for determining physician payments. The resulting system would be consistent, permanent, and not subject to budgetary whims, yet still accomplish the original goal of the SGR: controlling Medicare costs.