August 2011 Washington Update: Page 2 of 2

August 12, 2011

Reform to the Sustainable Growth Rate Formula Fails to Make Debt Ceiling Deal

In July 2011, the American Geriatrics Society (AGS) and more than 100 additional organizations wrote a letter to President Obama urging that any agreement to raise the debt ceiling include a provision to replace Medicare’s Sustainable Growth Rate (SGR) formula with a viable alternative.

“Any serious proposal to confront the fiscal challenges facing our nation, and the Medicare program in particular, must address the massive funding deficit caused by the repeated failure to replace the SGR,” wrote AGS and its 112 cosigners.

The letter went unheeded, as the compromise reached between Congress and the Administration and enacted into law, failed to take this important step. Nor did the legislation include any of the cuts to Medicare that were reportedly “on the table.” It caps discretionary spending across the board, except for the Medicare, Medicaid, and Social Security programs.

Although the debt ceiling has now been raised and default was narrowly avoided, the deficit debate resumes this fall. The deal that emerged requires Congress to appoint a 12-member panel, being deemed the “Super Congress,” consisting of three Republicans and three Democrats from the House and three Republicans and three Democrats from the Senate. If, by the end of the year, this group fails to come up with a plan that reduces the deficit by $1.2 trillion over the next decade, automatic cuts will go into effect.

Social Security is the only program completely off limits to the panel; the panel is not restricted from recommending cuts to Medicare and Medicaid. Should the group fail to reach an agreement, the automatic cuts to Medicare are limited to a maximum of 2% of the program’s cost. Medicare cuts must come from payments to providers and insurers, not benefits, and seniors’ premiums cannot be increased.

AGS and groups such as the American Medical Association, the American College of Physicians, the American College of Cardiology, the American College of Surgeons, and other organizations that signed the letter to the president will continue to follow the situation closely. AGS will continue its push to see any Medicare reform include replacing the SGR with a sustainable, appropriate formula for physician fees.