President Obama favors replacing the sustainable growth rate (SGR) formula with “a permanent, fiscally responsible” method for setting Medicare’s physician payment rates.
 
As discussed in the summary of the president’s  2014 budget the Office of Management and Budget released April 10,  the alternative payment method the president has in mind would encourage care coordination, reward practitioners who provide “high-quality, efficient care” and hold practitioners accountable financially if they “consistently provide low quality care at excessive costs.”
 
If the SGR remains unchanged, physician reimbursement is schedule to drop 25% on Jan 1, 2014 -- the kind of harsh reduction Congress regularly has avoided with stop-gap legislation in order to preserve physician access for beneficiaries. As an offset for the cost of replacing the SGR formula, the president’s budget would modify payments to certain providers whose payments “exceed patient care costs.” One example would be to pay for Medicare prescription drugs at the same rebate method used in the Medicaid program, the budget summary suggests.
 
 Other savings would come from anti-fraud activities, “greater scrutiny over payment for power wheelchairs and incentives for skilled nursing homes to prevent hospital readmissions.”