By Richard Nelson, managing editor, March 01, 2012
At press time, Congress was still working out how to pay for extending 2011’s Medicare payment rates for the rest of 2012, having passed a two-month extension covering January and February just before adjourning for the holidays. Despite calls from most major medical associations to find a permanent solution to the ongoing Medicare payment problem caused by the Sustainable Growth Rate (SGR) formula, Congress was working on a fix for 2012 alone, setting up yet another debate on the issue for the end of this year.
The SGR formula, established by the Balanced Budget Act of 1997, sets a target for cumulative Medicare spending and requires spending in subsequent years to drop to make up for spending above the target in prior years. Thus, the price tag for eliminating the SGR continues to grow, making it harder and harder for Congress to find offsets to pay for fixing the problem. The chart below illustrates how the cost of a 10-year fix defined simply as freezing payments at current levels has ballooned in the last several years, and how Congressional Budget Office estimates indicate it will continue to grow over time.