Medicare Physician Compensation

Doc Fix: 2014 Edition

It’s that time of year.  The time of year where Medicare threatens to cut physician salaries by double digits (in this case 24.4%).  This is no idle threat.  Under current law, CMS is mandated to cut physician salaries under the sustainable growth rate formula.   Its the time of year that physician lobbyists (rightly) complain that such a cut to wages would greatly reduce the share of physicians that accept Medicare (and Medicaid) payments.  This issue has come up every December (for instance, see my 2012/13, 2011/12 posts).

Yet, this year, Congress just may fix the SGR.  The National Journal reports:

Senate Finance Committee Chairman Max Baucus says his panel will consider so-called “doc fix” legislation  to repeal the rate formula used for physician reimbursement under Medicare when lawmakers return to Washington in December.

The Montana Democrat sent out a notice Thursday to fellow committee members announcing they will meet in “open executive session” on Dec. 12 “to consider an original bill to repeal what is officially known as the Medicare Sustainable Growth Rate (SGR) formula.”

The legislation that Baucus will offer will be distributed 48 hours before the start of that meeting.

However, there remain significant stumbling blocks to any major overhaul of the doc fix—including how to pay for it—even as bipartisan support for repeal has gained momentum.

Unless Congress acts by Jan. 1 in some manner, Medicare physician payments will be cut by about 24.4 percent.

Although almost no one believes that the SGR will come into play. Such a drastic cut to physician salaries would greatly reduce patient access to physicians as many physicians stopped accepting Medicare. In fact, organizations such as the Congressional Budget Office (CBO) even makes alternative long-term budget projections that assume that the SGR will never be enacted. The reason why SGR is not repealed is that it would make the official budget look much worse than it does on paper.

Will the SGR be repealed? With Congress’s recent history of failing to pass any legislation to avert a shutdown, my bet is that there will be a 1 year reprieve for the SGR and Congress will once again kick the can down the road.

From the CBO’s 2013 Long-Term Budget Outlook:

Three key policies that might be difficult to sustain over a long period are the ongoing reductions in payment updates for most providers in the fee-for-service program, the sustainable growth rate mechanism for payment rates for physicians, and spending reductions from the process associated with the Independent Payment Advisory Board


  1. The American Medical Association continues to push for a solution that takes the instability out of the Medicare system and removes the roadblocks for physicians to provide high-quality care to the patients who depend on them. We urge Congress to act decisively this year to pass the SGR repeal, provide positive updates and improve the performance programs. Otherwise it risks spending additional billions of taxpayer dollars on another patch that preserves the broken Medicare payment formula for another year or two.

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