Congress Acts to Repeal SGR Formula

The verdict is in: Congress has passed legislation to permanently repeal Medicare’s sustainable growth rate (SGR) formula. The bill was approved by the US House of Representatives on March 26, and the 92-8 vote in the US Senate on April 14 now puts the legislation in the hands of President Barack Obama, who is expected to sign it. The $200-billion deal staves off a 21.2% cut to Medicare payment rates and extends the Children’s Health Insurance Program (CHIP) while repealing the nearly 20-year-old formula.

After the US House of Representatives passed the bipartisan SGR legislation on March 26, pressure then mounted on members of the Senate to sign and approve the deal as well before leaving on spring break. The March 31 deadline to pass the bill came and went, however, with members of Congress heading home for a 2-week holiday recess. Prominent senators shared their optimism that the issue would be addressed upon their April 13 return, although practice managers and administrators, wary from past experience, remain cautious.

A patch enacted in 2014 to the SGR formula expired on March 31, and, had the legislation not passed, the Centers for Medicare & Medicaid Services (CMS) would have been required to proceed as if the 21.2% cuts to Medicare payments had taken effect. Under current law, however, it would not actually have had to pay out April 1 claims under any fee schedule until April 14 at the earliest. In the past, CMS has also held claims for longer than the 14 days in anticipation of congressional action on the SGR formula.

Medicare had been required to annually publish the Medicare conversion factor, the SGR update, and allowed expenditures for physicians’ services for the upcoming year. For years, the rise in physician services expenditures had resulted in an ever-increasing SGR correction against the targeted expenditures, and an annual announcement of a double-digit reduction in physician services rates—21.2% this year—scheduled for each April 1. Each year, the medical community has risen up, decrying the unsustainability of double-digit rate reductions in the physician fee schedule.

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