Lawmakers on the Senate Finance Committee spent Tuesday working on plans to fix Medicare's unpopular sustainable growth rate, which governs how much Medicare pays physicians to care for beneficiaries.

“In 2010 alone, we passed six short-term fixes,” said Committee chair Max Baucus (D-Mont.) during the hearing. “It is time to break this cycle.”

The formula was created in 1997 to limit Medicare's spending growth by linking physician pay to the growth of the economy. Physicians for years have faced off against looming pay cuts in the 20%+ range, but Congress stepped in each time to avert the cuts. However, a 27% cut is on track again for January 1 unless Congress patches the system one more time or comes up with a new plan.

Proposals to fix the problem have been expensive, but this year the Congressional Budget Office knocked more than $100 billion off that bill, meaning lawmakers need to come up with $138 billion rather than $245 billion in order to offset the cost of changing the system. “This is a window of opportunity,” said Baucus.

The Senator last convened a hearing to replace Medicare's sustainable growth-rate formula on March 1, 2007. This year, in an attempt to come up with a long-term solution, the Senate panel held a series of discussions with physician groups, former CMS administrators and policy experts. The discussions were followed by a May 10 letter from Baucus and Sen. Orrin Hatch (R-Utah), ranking member of the Finance Committee, to physician advocates seeking suggestions on a replacement Medicare payment system “that results in high quality, affordable care for seniors.”

The hearing featured three policy experts: Mark Miller, executive director of the Medicare Payment Advisory Commission; Bruce Steinwald, former director of the Government Accountability Office; and Dr. Kavita Patel, managing director of the Engelberg Center for Health Care Reform at the Brookings Institution. MedPAC has supported repeal of the SGR for 12 years and it laid out the same blueprint it released this spring, which proposes that Congress pay for the elimination of the SGR using a range of pay freezes and cuts to providers that it first proposed in 2011.

Patel was a member of the National Commission on Physician Payment Reform, which was convened last year by the Society of General Internal Medicine. That panel urged a series of physician pay changes in March, including repeal of the SGR and covering the cost of repeal with cuts from the Medicare program as a whole.