Medicare Physician Payments: Information on Spending Trends and Targets

The Sustainable Growth Rate (SGR) system, implemented in 1998 and subsequently revised, is used to update Medicare's physician fees and moderate the growth in Medicare spending for physician services. SGR, and a predecessor system implemented in 1992, were designed to reduce physician fee updates if spending growth exceeded a specified target. Although spending growth slowed substantially under both systems, concerns about SGR arose when the system caused fees to decline by 5.4 percent in 2002. GAO was asked to discuss (1) Medicare physician spending trends both before and after the implementation of spending targets and (2) the evolution and mechanics of the SGR system. This statement is largely based on GAO's previous work on Medicare spending trends and the SGR system.