Congress has just passed, and the President has signed into law, new legislation that resolves the perpetual threats to physician service payments billed under the Medicare Physician Fee Schedule (MPFS). These threats were tied to the Sustainable Growth Rate (SGR) formula that allowed for growth in Medicare payments year - over - year by considering factors that would change over time. These factors included increases in the prices of inputs, escalation in Medicare's enrollment, and expansion in the volume of services, based on growth in per - capita gross domestic product (GDP).
The rationale for setting GDP as the target is that if the economy grows, then payments can increase. However, if the economy contracts -- as in the financial markets' crash in the early 2000s -- the SGR formula produces negative payment updates. Since then, the volume and intensity of physician services have grown much faster than the overall economy, widening the funding gap each year. Compensating for the payment cuts then became an annual (or more frequent) exercise for Congress.