Will physicians finally be free from worrying that their Medicare payments will be severely slashed?  During the first week in February, Republicans and Democrats in the U.S. House of Representatives and Senate agreed on a bill which would repeal the SGR formula and thus avoid the necessity for a recurring, last minute stop-gap fix, known as the ‘doc fix’.

In 1997, Congress passed a budget law designed to slow the increase in Medicare spending.  The law linked Medicare reimbursements to physicians to economic growth through a formula called the “sustainable growth rate” (SGR).  If Medicare expenditures exceeded a specified target, reimbursement for physician services would be reduced in the following year, to keep aggregate spending under control.

Medicare spending has exceeded the target every year for more than a decade, setting up the doctors for significant pay cuts.  Each year, Congress has jumped in, often at the 11th hour, just before the reimbursement cuts were to be implemented, with a short-term “doc fix” to prevent the cuts from becoming effective.  Because the would-be cuts are cumulative, the reduction in reimbursements to physicians would now be staggering if it went into full effect.

The new proposal, which would be phased in over a period of years, seeks to better align Medicare payments to physicians with medical outcomes and quality of service, moving away from the current fee-for-service system.  Beginning in 2018, physicians providing services to Medicare patients could earn bonuses, or could suffer penalties, for achieving, or failing to achieve, certain medical quality targets and for making “meaningful use” of electronic health records.

The new proposal is not yet a done deal; Congress has not yet come up with a way to pay for the new plan.  The clock is ticking, though.  Under the SGR formula, current Medicare physician pay rates are scheduled to be cut by 24% as of March 31, 2014, so there is severe time pressure to find a solution.

Watch this space for future developments and to see if Congress can come up with a permanent solutions for the annual “doc fix.”