[Federal Register Volume 64, Number 190 (Friday, October 1, 1999)]
[Notices]
[Pages 53394-53396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25527]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration
[HCFA-1058-FN]
RIN 0938-AJ60


Medicare Program; Sustainable Growth Rate for Fiscal Year 2000

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final notice.

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SUMMARY: This final notice announces the fiscal year 2000 Sustainable 
Growth Rate (SGR) for expenditures for physicians' services under the 
Medicare Supplementary Medical Insurance (Part B) program as required 
by section 1848(f) of the Social Security Act (the Act). The SGR for 
fiscal year 2000 is 2.1 percent.

EFFECTIVE DATE: The provisions of the Medicare SGR for fiscal year 2000 
contained in this notice are effective on October 1, 1999.


[[Page 53395]]


FOR FURTHER INFORMATION CONTACT: Raymond Bulls, (410) 786-7267.

SUPPLEMENTARY INFORMATION:

I. Background

A. Medicare Sustainable Growth Rate

    Section 1848(f) of the Social Security Act (the Act), as amended by 
section 4503 of the Balanced Budget Act of 1997 (BBA) (Public Law 105-
33), enacted on August 5, 1997, replaces the volume performance 
standard with a Sustainable Growth Rate (SGR) standard. It specifies 
the formula for establishing yearly SGR targets for physicians' 
services under Medicare. The use of SGR targets is intended to control 
the actual growth in Medicare expenditures for physicians' services.
    The SGR targets are not limits on expenditures. Payments for 
services are not withheld if the SGR target is exceeded. Rather, the 
appropriate fee schedule update, as specified in section 1848(d)(3)(A) 
of the Act, is adjusted to reflect the success or failure in meeting 
the SGR target.
    Amended section 1848(f)(2) of the Act states that ``* * * the 
sustainable growth rate for all physicians' services for a fiscal year 
(beginning with fiscal year 1998) shall be equal to the product of--
    (A) 1 plus the Secretary's estimate of the weighted-average 
percentage increase (divided by 100) in the fees for all physicians' 
services in the fiscal year involved;
    (B) 1 plus the Secretary's estimate of the percentage change 
(divided by 100) in the average number of individuals enrolled under 
this part (other than Medicare+Choice plan enrollees) from the previous 
fiscal year to the fiscal year involved;
    (C) 1 plus the Secretary's estimate of the projected percentage 
growth in real gross domestic product per capita (divided by 100) from 
the previous fiscal year to the year involved; and
    (D) 1 plus the Secretary's estimate of the percentage change 
(divided by 100) in expenditures for all physicians' services in the 
fiscal year (compared with the previous fiscal year) which will result 
from changes in law or regulations, determined without taking into 
account estimated changes in expenditures resulting from the update 
adjustment factor determined under subsection (d)(3)(B), minus 1 and 
multiplied by 100.''

B. Physicians' Services

    Because the scope of physicians' services covered by the SGR is the 
same as the scope of services that was covered by the Medicare volume 
performance standards, we are using the same definition of physicians' 
services for the SGR in this notice as we did for the Medicare volume 
performance standards published in the Federal Register (61 FR 59717) 
on November 22, 1996. That final notice announced the fiscal year 1997 
volume performance standard rates and contained a detailed description 
of the scope of physicians' services.

II. Provisions of This Notice

    Under the requirements in sections 1848(f)(2)(A) through (D) of the 
Act, as amended by section 4503 of the BBA, we have determined that the 
SGR for physicians' services for fiscal year 2000 is 2.1 percent. Our 
determination is based on the following statutory factors:

------------------------------------------------------------------------
                                                               Percent
                     Statutory factors                          change
------------------------------------------------------------------------
Fees.......................................................          2.1
Enrollment.................................................         -1.6
Increase in Gross Domestic Product.........................          1.8
Legislation................................................         -0.2
                                                            ------------
    Total..................................................          2.1
------------------------------------------------------------------------

    The specific calculations to determine the 2.1 percent SGR for 
physicians' services for fiscal year 2000 are explained below.

III. Calculation of the Fiscal Year 2000 Sustainable Growth Rate

    Our explanation of how we determined the values for each of the 
four factors used in determining the SGR for fiscal year 2000 is as 
follows:

Factor 1--Changes in Fees for Physicians' Services (Before Applying 
Legislative Adjustments) for Fiscal Year 2000

    This factor was calculated as a weighted average of the calendar 
year 1999 and 2000 fee increases that apply during fiscal year 2000.
    Most of the fees for physicians' services (as defined in section I. 
B. of this final notice) are updated by the Medicare Economic Index 
(MEI). However, the BBA provided for a 0.0 percent update in 1999 and 
2000 for laboratory services, which represents about 11 percent of the 
Medicare-allowed charges for physicians' services. The following table, 
therefore, shows both the MEI and laboratory service updates that were 
used in determining the percentage increase in physicians' fees for 
fiscal year 2000.

Medicare Economic Index and Laboratory Service Update for Calendar Years
                              1999 and 2000
------------------------------------------------------------------------
                                                       1999       2000
------------------------------------------------------------------------
Medicare Economic Index...........................        2.3        2.3
Laboratory Service................................        0.0        0.0
------------------------------------------------------------------------

    After taking into account all the elements described above, we 
estimate that the weighted-average increase in fees for physicians' 
services in fiscal year 2000, before applying any legislative 
adjustments to the MEI, will be 2.1 percent for all physicians' 
services.

Factor 2--The Percentage Change in the Average Number of Part B 
Enrollees From Fiscal Year 1999 to Fiscal Year 2000

    Due to the growth in Medicare+Choice plan enrollees (whose 
Medicare-covered medical care is outside the scope of the SGR), we 
estimate that the average number of Medicare Part B enrollees, 
excluding those in Medicare+Choice plans, will decline by 1.6 percent. 
This decline was derived as follows:

----------------------------------------------------------------------------------------------------------------
                                                                     Average Medicare Part B enrollment  (in
                                                                                    millions)
                                                               -------------------------------------------------
                          Fiscal year                                                                Overall,
                                                                    Overall     Medicare+Choice     excluding
                                                                                                 Medicare+Choice
----------------------------------------------------------------------------------------------------------------
1999..........................................................          36.866            6.116           30.750
2000..........................................................          37.178            6.917           30.261
    Percent change............................................  ..............  ...............           -1.6
----------------------------------------------------------------------------------------------------------------


[[Page 53396]]

Factor 3--Estimated Real Gross Domestic Product Per Capita Growth in 
Fiscal Year 2000

    Section 1848(f)(2)(C) of the Act, as amended by section 4503 of the 
BBA, requires the Secretary to project real gross domestic product per 
capita growth for the coming fiscal year. In calculating the SGR, we 
estimate that this growth will be 1.8 percent in fiscal year 2000.

Factor 4--Percentage Change in Expenditures for Physicians' Services 
Resulting From Changes in Law or Regulations in Fiscal Year 2000 
Compared With Fiscal Year 1999

    Legislative changes contained in the BBA will have some residual 
effects on expenditures for physicians' services in fiscal year 2000. 
In addition, there are some miscellaneous provisions that will have a 
small impact.
    Taking into account all of the changes in law or regulation that 
may affect expenditures for physicians' services, the decrease in 
expenditures for physicians' services is estimated to be -0.2 percent.

IV. The Use of Estimates in Computing the Sustainable Growth Rate

    Section 1848(f) of the Act clearly requires that each year, the 
Secretary establish the SGR for the upcoming fiscal year beginning 
October 1 based on the Secretary's estimate[s] of four factors: The 
percentage increase in physicians' fees, the percentage increase in 
fee-for-service enrollment, the projected percentage growth in per 
capita gross domestic product, and the percentage change in 
expenditures for physicians' services resulting from changes in law or 
regulations. Because the calculation of the SGR for a given year is 
based on projected values, updates may be either lower or higher than 
they would have been if we had used later data. Thus, we initially 
considered revising estimates of the factors used in setting the SGR 
when later data had become available. However, as we indicated in the 
notice with comment period published in the Federal Register (63 FR 
59188) on November 2, 1998, we had concerns about whether we had the 
statutory authority to make these revisions under current law and 
invited comments regarding how an adjustment could be made consistent 
with the law. The comments we received and our response are discussed 
below.
    Comment: The American Medical Association and numerous physician 
organizations suggested that congressional intent should be interpreted 
to authorize adjustments for projection error. These commenters also 
suggested a number of different approaches for making such adjustments. 
The various approaches suggested rely on later data.
    Response: We do not believe that we have the authority to make 
adjustments based on Congressional intent because the statutory 
language clearly requires that estimated values be used for computing 
the SGR and there is no provision for revising the estimates to reflect 
later data. Our actions are controlled by the clear statutory language. 
Thus, we will not be able to make adjustments to the SGR based on later 
data.
    However, the Administration's legislative package for fiscal year 
2000, released in February 1999, contains a legislative proposal to 
adjust the SGR if later data are different from earlier estimates, as 
well as to address issues relating to the instability of the SGR 
discussed below. The changes proposed are all budget neutral. If 
Congress enacts this proposal for fiscal year 2000, we would revise the 
SGR for fiscal year 2000 as appropriate.

V. Technical Problems With the Sustainable Growth Rate System

    We have begun to forecast the SGR for future years, and it appears 
that there is some instability in the SGR system. In the long-term, 
updates could oscillate between the maximum increase and decrease 
adjustments due to the use of mismatched time periods and the lag 
between measurement periods. The solution would be technical and would 
involve the matching of time periods for the SGR calculation, the 
actual versus target measurement, and the update adjustment. As 
discussed above the Administration has submitted a legislative proposal 
to the Congress that will address these factors and result in less 
oscillation in the physician fee schedule update.

VI. Regulatory Impact Statement

    Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612), we prepare a regulatory flexibility analysis unless we 
certify that a notice will not have a significant economic impact on a 
substantial number of small entities. For purposes of the RFA, we treat 
all physicians and suppliers as small entities. Individuals and States 
are not included in the definition of a small entity.
    Also, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a notice may have a significant impact on 
the operations of a substantial number of small rural hospitals. That 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 50 beds.
    Legislative changes contained in the BBA will affect expenditures 
for physicians' services in fiscal year 2000, although the impact will 
be slight, and residual effects will result in fiscal year 2000 from 
the calendar year implementation of these changes.
    We are not preparing an analysis for either the RFA or section 
1102(b) of the Act because we have determined, and the Secretary 
certifies, that this notice will not have a significant economic impact 
on a substantial number of small entities or on the operations of a 
substantial number of small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.
    We have reviewed this final notice under the threshold criteria of 
Executive Order 13132 of August 4, 1999, and have determined that it 
does not significantly affect the rights, roles, and responsibilities 
of States.

(Sections 1848(d) and (f) of the Social Security Act) (42 U.S.C. 
1395w-4(d) and (f))

(Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: September 1, 1999.
Michael M. Hash,
Deputy Administrator, Health Care Financing Administration.
    Approved: September 20, 1999.
Donna E. Shalala,
Secretary.
[FR Doc. 99-25527 Filed 9-28-99; 9:58 am]
BILLING CODE 4120-01-P