Medicare’s Payments to Physicians: The Budgetary Impact of Alternative Policies Relative to CBO’s March 2012 Baseline

by Sabrina I. Pacifici on August 6, 2012

“Medicare’s payment rates for physicians’ services are scheduled to be reduced by 27 percent in 2013, the Congressional Budget Office (CBO) estimates, under the provisions of law known as Medicare’s Sustainable Growth Rate (SGR) mechanism. The SGR mechanism consists of expenditure targets, which are established by applying a growth rate (calculated by formula) to spending for physicians’ services and certain related services in a base period, and annual adjustments to the payment rates, which are designed to bring spending in line with the expenditure targets over time. In each of the past several years, legislation has been enacted to override the SGR and to either maintain or increase those payment rates when they were otherwise scheduled to decrease. The following tables show CBO’s estimates of the budgetary impact over the 2013–2022 period of various alternative policies for modifying the payment rates that are scheduled to take effect under the SGR mechanism. The options below are listed in three categories: “cliff” options, “clawback” options, and others. (See the descriptions of those terms below; both “cliff” and “clawback” approaches have been adopted since the Congress began overriding scheduled reductions in physician payment updates in 2003.)”

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