Goodbye, Sustainable Growth Rate—Hello, Merit-Based Incentive Payment System

After years of haunting physicians with the specter of scheduled Medicare payment cuts, the Sustainable Growth Rate (SGR) formula has been put to rest. On 16 April 2015, President Obama signed the Medicare Access and Children's Health Insurance Program Reauthorization Act (MACRA), which, in addition to repealing the SGR, put in motion policies to transform physician payments from a system that rewards volume to one that recognizes value. Congress established the SGR in 1997 to ensure that annual payment increases did not exceed growth in the overall economy, as measured by per capita gross domestic product. The inherent mismatch between economic growth, which physicians cannot control, and overall annual growth in spending on services included in the Medicare physician fee schedule, which individual physicians have limited influence over, has led to scheduled cuts in Medicare payments every year from 2002 through 2015. The SGR did not differentiate between the most or least efficient physician.

Although Congress overrode the cuts every year except 2002, physicians never knew whether the next cut would be implemented. The usual solution was a temporary patch that replaced the cut with a fee freeze or tiny percentage increase. Worse, Congress masked the cost of the patch by pretending that it would be paid for by an even deeper cut the next time around. Consequently, physicians were facing a 21% cut on 1 April 2015 until the MACRA reversed it. The MACRA, though, is about more than SGR repeal: It's also about accelerating changes in Medicare payment policies to recognize value rather than volume. It offers physicians more stability and potentially more control over reimbursement in the following ways.