Sustainable Growth Rate Overrides Are 'Elephant in the Room', Study Says

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Nine years of congressional overrides of the sustainable growth rate (SGR) provision of the Balanced Budget Act of 1997 constitute the "elephant in the room," leaving the federal government with significant budget deficit exposure, according to an analysis released by MedeAnalytics, a provider of health care performance management solutions.

"Putting off reform of the SGR even for a year would result in implementation of a very significant decrease to Medicare physician fees in calendar year 2012, which would lead to reduced physician participation in Medicare, and therefore, patients' access to care,” says report author Ken Perez, director of MedeAnalytics’ health care policy team and the company’s senior vice president of marketing.

Perez adds that a permanent fix—whenever it ultimately becomes a reality—will impose costly years of reckoning. "Although arcane and heretofore obscure, SGR reform merits entry into the calculus of deficit reduction and will be factored into the appraisal of our nation's creditworthiness by the credit rating agencies," he asserts.

The report, which examines the history of the SGR and congressional overrides of the provision, details the potential cumulative effect of temporary fixes in the broader context of the Budget Control Act of 2011 (BCA), generally referred to as the "debt deal." The report also reviews various efforts to reform the SGR, outlines four options for addressing the problem, and discusses in detail three possible SGR scenarios..

Under the first such scenario, dubbed “do nothing”, a 29.5% reduction in Medicare physician fees would take effect on January. 1, 2012—in addition to reductions called for under the BCA. The second scenario would involve another temporary fix--increasing the eventual cost of a permanent fix and highlighting Congress' lack of resolve to find a permanent solution. This fact, the report indicates, would assuredly be noted by the credit rating agencies, possibly contributing to future downgrades of the sovereign credit rating of the U.S.

In the third scenario—which assumes congressional passage of one of the most likely SGR options—there would be an increase of approximately $300 billion in Medicare spending on physician services between 2012 and 2021. The end-result and would be necessary offsetting cuts in other parts of Medicare and Medicaid, and quite possibly in other, non-health care sectors, Perez and his colleagues claim.

To download the report, click here: http://marketing.medeanalytics.com/acton/form/1156/0097:d-0001/0/index.htm