Physician Fee Schedule Annual Updates: Dollar Conversion Factors and Sustainable Growth Rate for 2000
Current Status as of November 23, 1999
These provisions are part of a final rule that becomes effective
January 1, 2000. Final regulations
were published November 2, 1999.
Background/Summary
Dollar Conversion Factors for 2000
The 2000 dollar conversion factor for physician services
covered under the Medicare fee schedule is $36.61. A separate
conversion factor is set for anesthesia services. The 2000
anesthesia conversion factor is $17.77.
Sustainable Growth Rate for 2000
The 2000 sustainable growth rate (SGR), an annual target
for total Medicare fee schedule expenditures for physicians,
is 3.0 percent. The SGR is intended to control the actual
growth in Medicare expenditures for physicians' services.
The annual fee schedule update and conversion factor is adjusted
to reflect the success or failure in meeting the SGR target.
Thus, as specified in the BBA, the update to the conversion
factor is established to match spending under the SGR. Problems
with the SGR formula have been identified by the AAMC, AMA,
and others (see SGR summary)
History
Prior to enactment of the Balanced Budget Act of 1997 (BBA
97), the Medicare fee schedule relative values for all services
were grouped into three service categories with three different
dollar conversion factors---one for surgical services, one
for primary care services, and one for all other services.
In 1997, the conversion factors were $40.96 for surgical services,
$35.77 for primary care services, and $33.85 for other services.
BBA 97 implemented a single dollar conversion factor for all
services, effective January 1, 1998.
Also prior to BBA 97, the annual dollar conversion factors
were updated each year by a formula specified in the law.
The update equaled inflation plus or minus actual spending
growth in a prior period compared to a target know as the
Medicare volume performance standard (MVPS). For example,
FY 1995 volume and intensity data were used to calculate the
1997 update. However, regardless of actual performance during
a base period, there was a 5 percentage point limit on the
amount the conversion factor could be reduced; there was no
limit on the amount of the update may be increased.
BBA 97 replaced the old Medicare volume performance standard
formula with a new annual update formula to match spending
to a "sustainable growth rate". The SGR is intended
to reflect growth in gross domestic product (GDP) rather than
historical volume and intensity of physician services. This
new approach began affecting updates in 1999. An upper limit
is placed on allowable fee increases---3 percentage points
above inflation. The lower limit on decreases is changed to
inflation minus 7 percentage points. This provision, the major
budget savings in BBA 97, will save $5.3 billion over five
years.
To illustrate, each year, the Medicare program will consider
four factors in determining the SGR for the upcoming fiscal
year:
- the percentage increase in fees for physicians' services
(before applying legislative adjustments) eg., for the FY
2000;
- the percentage change in the average number of Part B
enrollees from one fiscal year to the next (eg. FY 1999
to FY 2000);
- the estimated real gross domestic product per capita growth
(eg. in FY 2000); and
- the percentage increase in expenditures for physicians'
services resulting from changes in the law or regulations
(eg. in FY 2000 relative to FY 1999).
AAMC Action
The AAMC is advocating changes
to the SGR formula to correct the inherent flaws in the
current update methodology. The Association has also prepared
a summary of the final
regulations that were published November 2, 1999.
Contacts
Denise Dodero, Associate Vice President
AAMC Health Care Affairs
ddodero@aamc.org
(202) 828-0493
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