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In an effort to control ever-increasing costs, Medicare, the federal program that pays health-care costs for the elderly, makes use of a very complex formula to set physician rates, of which the sustainable growth rate is a piece. Congressional Budget Office director Peter R. Orszag took five pages of printed congressional testimony to give a summary of the sustainable growth rate.
The essence of the sustainable growth rate, said Orszag, "Payment rates are adjusted annually to reflect differences between actual spending and (a) spending target (set by the government), upward if spending is below the target, downward if spending is above the target."
Plested argued that the nature of the Medicare patient nearly guarantees that expenditures will always go beyond targets, which means rates paid to physicians will always be adjusted downward.
Patients are living longer, processes that were once done in hospitals are done in clinics and offices, patients who would be hospitalized in the past often remain in their own homes, and technology obtainable to a doctor's office is improved but also more pricey. The upshot is that physicians see sicker patients than ever and have to spend more time, technology and effort on their care, he said.