Medicare 10.6% pay cut reversed as Congress overrides Bush veto

Washington -- Both houses of Congress on July 15 defeated a veto from President Bush and enacted a bill that implements an 18-month Medicare physician payment patch by reducing extra program payments to private health plans.

The votes, which came the same day Bush issued the veto, ensure that physicians will be paid at the same rates for the remainder of this year that they have since January. Next year they will receive a 1.1% raise. Without this action, payment would have been cut 10.6% for the rest of 2008 and an additional 5.4% in 2009. The House vote was 383-41, and the Senate tally was 70-26.

If the double-digit cut had gone into effect for the last six months of the year, it would have been devastating for beneficiary access to physicians, said American Medical Association President Nancy H. Nielsen, MD, PhD. "It has been a long and winding road, but today we celebrate that Congress heard the voices of millions of patients and physicians and voted to override President Bush's veto and protect the health of America. We thank the bipartisan majority in Congress who voted to put patients first."

The bill had a bumpy path. In the Senate, supporters were unable to garner enough votes on June 26 to cut off debate on the measure. The AMA and other physician organizations expressed outrage that a minority of Republican senators blocked the bill. The Association ran a series of television advertisements in six states that named 10 of these senators and blasted them for voting against the legislation.

Congressional aides said the ads and a grassroots groundswell from angry doctors appeared to have the desired effect over the Independence Day break. Nine GOP senators changed their positions, clearing the way for the bill's final passage on July 9.

After the legislation had achieved a veto-proof margin in both houses, organizations representing physicians, seniors and patient advocates joined Democratic lawmakers in urging Bush to see the writing on the wall and sign the bill into law. But Bush insisted on the veto, citing his opposition to a provision that would slash Medicare Advantage plan payments to help fund the physician pay freeze and increase.

Bill supporters argued that Medicare overpays private insurers and that the reduced pay would level the playing field with traditional Medicare. Opponents said the plans offer extra benefits not available under fee for service.

"I support the primary objective of this legislation, to forestall reductions in physician payments," Bush said in a statement announcing his veto. "Yet taking choices away from seniors to pay physicians is wrong."

What's in store for physicians

The action by Congress is retroactive to July 1, meaning that all 2008 claims eventually will be paid at the same rate that they have been since January. The Centers for Medicare & Medicaid Services held physician payments until July 15 to give lawmakers more time to act, but the presidential veto meant that Congress was unable to enact the final legislation until late that day. So at least some of the first physician claims of the month will go out with the 10.6% cut in effect.

Medicare will need to reprocess those claims before physicians receive the full rates to which they are entitled. CMS officials could not immediately say how many claims would fall into this category but said physicians should start to be paid at the revised rates in up to 10 business days.

The American College of Physicians blamed the White House for the missed deadline.

"An immediate presidential signature following last week's Senate passage of the bill would have prevented a disruption of physician claims creating uncertainty and cash flow problems for many practices," said ACP President Jeffrey P. Harris, MD.

In addition, the legislation does nothing to address the sustainable growth rate formula that has set up physicians for numerous yearly cuts over the next decade. Because the 2008 retroactive freeze and the 1.1% update in 2009 will not be taken into account when applying the payment formula in the future, the projected cut in 2010 will be roughly 20%.

"This congressional debate underscores the need for lawmakers to permanently replace the flawed Medicare physician payment formula so physicians can focus on the real work at hand: taking care of patients," the AMA's Dr. Nielsen said.

Bush cited the temporary nature of the physician payment patch as another reason for his veto.

"It is fiscally irresponsible, and it would imperil the long-term fiscal soundness of Medicare by using short-term budget gimmicks that do not solve the problem," he said. "The result would be a steep and unrealistic payment cut for physicians ... likely leading to yet another expensive temporary fix."

Bush also cautioned that a provision in the bill allowing Medicare Part D to expand the number of protected drug classes -- the types of medications for which plans must cover virtually every drug -- would lead to higher prices for enrollees.

Insurers warned that physicians who treat Medicare Advantage beneficiaries would find that their patients will have fewer benefits after the health plan payment cuts go through. As a result, fewer seniors will opt for this type of coverage. The Congressional Budget Office estimated that 2.3 million fewer beneficiaries will be enrolled in Medicare Advantage in five years because of the payment reductions.

Under the new law, federal policy on electronic prescribing will undergo a major change. Starting next year, physicians will receive incentives of up to 2% of their Medicare payments for using electronic prescribing to place drug orders covered by the program's drug benefit. The bonus will phase down to 0.5% in 2013. Starting in 2011, doctors will be required to use e-prescribing in Medicare and eventually will see their pay docked by up to 2% if they don't.

Dr. Nielsen hailed provisions that boost rural physician payments, raise bonuses starting next year for quality reporting, phase out higher co-payments for mental health services, increase funding for the medical home demonstration project and boost payments for anesthesia teaching programs.