Payment Reform Essential to Improve Health Care, Reduce Cost

Payment Reform Essential to Improve Health Care, Reduce Cost

New Health Affairs Article Evaluates Proposal to Permanently Repeal the Sustainable Growth Rate
Mar 11, 2015

A permanent repeal of the sustainable growth rate (SGR) as part of a package of other payment reforms can lead to lower health care costs and improved care, according to a Health Affairs article released today by Mathematica senior fellow James Reschovsky and his coauthors. 

An outdated, ineffective formula that adjusts Medicare physician fees as a way to limit spending, the SGR has been overridden by Congress 18 times over 13 consecutive years. A permanent repeal of the SGR would allow traditional Medicare to move away from the
fee-for-service model and toward value-based payment structures that could transform and improve the organization and delivery of health care, according to Reschovsky.

Solving the Sustainable Growth Rate Formula Conundrum Continues Steps Toward Cost Savings and Care Improvements assesses last year’s attempt by Congress to repeal the SGR—the “2014 SGR fix”—which is likely to serve as a model for congressional efforts to repeal the SGR this year. The 2014 SGR fix achieved bipartisan and bicameral agreement, but did not pass because legislators disagreed about how to pay for it. It replaced the SGR with set fee updates and contained measures to move Medicare to a more value-based payment system. In the paper, Reschovsky and his coauthors also argue that reforms like those in the 2014 SGR fix should be coupled with serious efforts to improve Medicare’s physician fee schedule. Without such efforts, fundamental reform of our health care delivery system will be increasingly difficult. 

Despite the advantages offered by permanent reform, Congress is expected to pass a temporary formula “patch” for the 18th time since 2002. Fundamental policy change is not easy, and Reschovsky contends that changes in care delivery and the resulting cost savings will be slow in coming. Nonetheless, the benefits of reform potentially outweigh the costs.

This study, which will also appear in the April 2015 issue of
Health Affairs, was supported by the Commonwealth Fund. Read the Health Affairs article here. For more information, please contact