Short-Term Fixes to the Sustainable Growth Rate Process . 2.2.3 Criticisms of the SGR Process


Advocates for SGR reform cite significant flaws with the current process.  First, recent updates have been large and negative, a consequence of over-spending.  A string of negative updates has pressured Congress to intervene legislatively, as large and widespread changes in provider behavior are necessary to overcome the negative impacts on payment updates from the terms of the UAF.  The SGR process as legislated is not sustainable.  As demonstrated below, the update calculated by the original formula has been consistently negative during the last several years and is expected to remain so into the future.  Congressional intervention may be needed annually until the process is changed.

A second flaw is that the target-setting mechanism may not accurately measure desired growth.  Some providers argue that the process does not allow for enough growth to accommodate changes in technology.  For example, some argue that GDP, as the measure of allowance for spending growth, is too low and thus not representative of society’s value of health care relative to other goods and services in the economy.  Some policymakers argue that certain types of services should be exempt from inclusion in the target setting process.  For example, expenditures on certain types of drugs are included, even though physicians have little control over drug pricing.  Others argue that the target should be applied only to services that are responsible for the fastest spending growth, e.g., due to overuse or incentives based on MFS relative values that are not correct measures of resource composition.   

Another set of criticisms has been directed at the presuppositions that target mechanisms implemented at the national level (such as the formula currently in use) generate incentives that will successfully alter behavior of individual providers, and that providers will overlook incentives on individual behavior and practice in a manner that benefits all physicians.  The update process’ lack of transparency makes it difficult for providers and policymakers to understand how behavior might be affected to help contain costs.

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