Bending the Medicare cost curve for physicians' services: lessons learned from Canada

Area of Science:

• Health Policy
• Medical Economics
• Public Health

Background:

• The Sustainable Growth Rate (SGR) formula was established by Congress in 1997 to control Medicare physician payment growth.
• The SGR links physician payment updates to the Gross Domestic Product (GDP) growth rate.
• Failure to meet SGR targets results in payment reductions for physicians under Medicare Part B.

Purpose of the Study:

• To analyze the challenges posed by the SGR formula for Medicare physician payments.
• To explore historical precedents and potential solutions for managing physician expenditure growth.
• To evaluate the feasibility of implementing regional expenditure targets in the U.S. Medicare system.

Main Methods:

• Historical analysis of the SGR formula's development and implementation.
• Review of policy decisions regarding SGR payment adjustments.
• Examination of international healthcare policy, specifically Canada's experience with regional expenditure targets.

Main Results:

• Congress has repeatedly postponed SGR-mandated physician payment cuts.
• Without further action, Medicare physician fees faced a potential reduction exceeding 30% in 2013.
• Canada successfully managed rising physician fees in the 1970s using regional expenditure targets.

Conclusions:

• The SGR formula presents a persistent policy dilemma for U.S. Medicare.
• Shifting to regional expenditure targets offers a potential alternative to the current SGR system.
• Lessons from Canadian Medicare's experience suggest the viability of regional targets for controlling U.S. physician costs.