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Question of the Week: Medicare Reimbursements


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Question: What is the Medicare sustainable growth rate (SGR) and why are so many people concerned about the Medicare reimbursement rates for physicians?

Answer: The SGR system was established in 1997 to help control Medicare costs. Under the SGR, Medicare estimates how much in total it will reimburse doctors in a given year.

If Medicare spends less than its target, physician payments are increased. On the other hand, if Medicare spends more than it planned, payments to physicians are supposed to be reduced to bring spending back in line with the target.

Unfortunately, over the past decade, Medicare spending has exceeded targets. This is due to medical inflation, new technology and treatments, and an aging population.

In the first few years of the SGR system, the actual expenditures did not exceed the targets and Medicare payments to physicians increased with medical inflation. Beginning in 2002, the actual expenditure exceeded allowed targets due to medical inflation.

This discrepancy has grown each year, resulting in a series of ever-larger cuts under the formula. Since 2002, Congress has intervened to prevent the scheduled cuts and has increased payments rates, but at less than the rate of inflation. On December 1, Medicare reimbursements to physicians are scheduled to be reduced by more than 21 percent.

While I strongly support eliminating waste and fraud from Medicare, physician offices, just like other businesses, cannot afford to accept reimbursements that are less than the cost of treating patients. For that reason, I have long been a strong supporter of raising the Medicare reimbursement rate for physicians.

Earlier this year, I, along with many of my colleagues, sent a letter to House Speaker Nancy Pelosi and Minority Leader John Boehner urging them to address this critical issue before the cuts go into effect. In the meantime, I continue to work with my colleagues on both sides of the aisle to find a permanent solution to this problem.

For more information on my positions on health care issues, please see my Health Care issues page.

For previous Questions of the Week chronologically and by topic, please see my Questions of the Week page.

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