Abstract
When the Congress implemented the Medicare program in 1965, gross domestic product (GDP) was 8 % and the annual Medicare per capita spending was approximately $292 per beneficiary. It became apparent a few years after implementation of the program that the cost of the program was growing significantly without any clear method to predict or restrain the increasing costs for healthcare services. Physician services were reimbursed by the “usual and customary method” which resulted in variations in payment for similar services by various specialties, variations in geographic payments for similar services, and increasing growth in the cost and utilization of physician services [1, 2]. By 2012, the average annual cost per Medicare beneficiary had risen to $12,210 [3].
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References
The initial payment structure of Medicare upon its inception as Title XVIII and Title XIX of the Social Security Act on July 30, 1965 (P.L.89–97) had a reimbursement system based on “reasonable costs” for hospital services (Medicare part A) and “usual, customary and reasonable charges” for physician and other medical services (Medicare part B).1 For Medicare Part B, this meant that physician payments were based on the lowest of the physician’s billed charge for the service, the customary charge for the service or the prevailing charge for that service in the community. (Davis PA, Talaga SR, et al. Medicare primer. Congressional Res Serv. https://www.fas.org/sgp/crs/misc/R40425.pdf. 2013.
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Due to the slowing of the overall growth of the healthcare system, the 10 year price of repealing the SGR fell from 316 billion in 2012 to 136 billion in 2015. This allowed for an environment which resulted in concerted effort among parties to finally repeal the law. Aaron H. Three cheers for logrolling—the demise of the SGR. New Engl J Med. 372(21):1977–8.
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This first phase-in allows for payments to stabilize and for a transition to a “value-based” payment system. Doherty RB. Goodbye, sustainable growth rate—Hello, Merit-Based incentive payment system. Ann Intern Med. 2015;163(2):138–9.
H.R. 2, One Hundred Fourteenth Congress of the United States of America, January 6, 2015, H.R.2-1-95.
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Simon, K., Roberts, S. (2017). CMS, the SGR, and MACRA. In: Savarise, M., Senkowski, C. (eds) Principles of Coding and Reimbursement for Surgeons. Springer, Cham. https://doi.org/10.1007/978-3-319-43595-4_5
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