Endocrine Insider
February 21, 2007

The proposed federal budget has projected a 10 percent cut to the physician payment rate in 2008. Much of the reason for the projected cut is based on CMS’ assumption that the Sustainable Growth Rate (SGR), the formula that determines physician payments, will remain intact this year.

The SGR has been a controversial payment system for some time, as it uses the Gross Domestic Product (GDP) in combination with other formulae to determine physician payment rates. Physicians and some members of Congress have said that tying physician payment to medical inflation is a more suitable means to determine payment rates. Some lawmakers have called for an end to the use of the SGR, replacing it with a similar expenditure target policy to be applied to all health care providers and hospitals. Currently, the SGR is applied only to physicians.

The Medicare Payment Advisory Commission (MedPAC) has been tasked with advising Congress on Medicare payment policies and recommending a new physician payment formula. Most recently, MedPAC failed to endorse either of two proposed alternatives to reform the physician payment system. Instead, they reiterated their concern that the SGR needs to be revised, but did not recommend a specific model with which to fix the problem.

While the projected cuts are cause for concern, the proposed 2008 budget currently under consideration will go through months of debate and revisions before approval by Congress. The Endocrine Society will keep abreast of the situation and continue to work with Congress and CMS to advocate for fair physician payment rates.