Why Medicare's 'Sustainable Growth Rate' Isn't

It's pretty clear that today's health-care summit is going to revolve around the big, obvious issues: how to increase the number of people with insurance, how to tamp down costs. But I'm hoping another, more immediately pressing issue will also be on the table: an enormous cut in Medicare payments to doctors that's scheduled to go into effect on Monday. Congress has been stalling on this issue for years, deferring the cut whenever it comes time to make it. It now has three options: defer the cut again, decide to never make it, or do nothing and watch as the cut gets made—in which case there are going to be a lot of angry doctors and, once those docs start refusing to see Medicare patients, a lot of angry seniors as well.

Here's the deal: In 1997, Congress came up with a formula, the "Sustainable Growth Rate," that set the amount Medicare would reimburse doctors for treating its patients. The formula was constructed to track with both health-care costs and the overall economy. The growth of the first started outstripping the second in 2001, and as a result, the formula began to call for a cut in Medicare payments to doctors. When it came time to make that cut, nobody seemed to want to go through with it. The reason was obvious. If doctors suddenly had to eat a substantial part of the cost of treating Medicare patients, they might drop those patients. "That would cause an uproar from a large voting bloc," says Lori Heim, president of the American Academy of Family Physicians. "So Congress just postponed dealing with the inevitable."

Every year since 2001, when the cut has come due, Congress has decided it needs more time to decide how it feels about the issue. Most recently, the cut was supposed to go into effect Jan. 1; Congress bought itself two more months. Monday, of course, is the new due date.

Meanwhile, because of the way the Sustainable Growth Rate formula is constructed, the cut has been getting bigger every time it's been delayed. If it gets made on Monday, doctors across the board will see a 21.2 percent drop in their reimbursement rates. That's an enormous amount. (For context: last year, specialists lathered themselves into a frenzy over the prospect of a 10 percent pay cut that would have been used to pay general practitioners more.) Many doctors can't afford to treat patients for so little compensation—especially primary-care doctors, who are already financially strapped.

Doctors were hoping that the Sustainable Growth Rate cut would be repealed as part of health-care reform. That's almost certainly not going to happen, at least not before March 1. The House has actually tried to do something about it already, largely at the request of the American Medical Association—after it failed to repeal the cut as part of its initial health-care reform bill, it passed a separate bill permanently eliminating the Sustainable Growth Rate formula. A similar bill, however, fell flat in the Senate after it garnered only 47 of the 60 votes it needed to get to the floor (perhaps because by then the cost of repealing the cut was clear: the Congressional Budget Office estimated it would add $210 billion to the federal deficit). Given how much else Congress has to deal with right now, it's probably not going to resolve this issue over the weekend, which means it'll likely just punt again. Reportedly, Senate Democrats are hoping for a new deadline of March 28.

At some point, of course, Congress will have to stop asking for extensions and either make the cut or kill the formula. Let's hope that happens before 2016, because Heim estimates that by then doctors will be looking at a Medicare cut of 40 percent. Ask yourself this: If your boss told you he was going to cut your pay by that much, what would you do? You'd get a new job—and if your boss was a congressman, you'd make sure he did too.