The Medicare Sustainable Growth Rate (SGR) is the current method used by the Centers for Medicare and Medicaid Services (CMS) to control spending by Medicare on physician services, through ensuring that the yearly increase in the expense per Medicare beneficiary does not exceed the growth in GDP. It was introduced in 1997 as part of the Balanced Budget Act of 1997. And, for the first couple years, it worked relatively well. That is because Medicare expenditures in those years did not exceed the target amount, allowing doctors to receive modest pay increases. But in 2002, the situation changed. Medicare expenditures exceeded the target expenditures set in the previous year, so Congress was required by statute to balance payments to match the target SGR. Doctors across the nation reacted with contempt as Congress attempted to enact a 4.8% pay cut. Congress eventually relented and passed stopgap legislation to prevent the scheduled cut, thereby temporarily suspending the reduction for a matter of weeks. Weeks then turned into months and months into years, and now physicians face a 26.5% cut under the SGR. Virtually no one believes Congress will allow the SGR to lower pay by such an amount, but doctors have sent a strong message to lawmakers that the annual ritual of enacting a last minute, transitory solution that only defers the increase to a later date needs to stop.
