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Senate rejects plan to repeal Medicare physician pay formula

Legislation to scuttle the SGR methodology and freeze rates for 10 years fell on a procedural vote.

By Chris Silva — Posted Oct. 26, 2009

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Washington Senate Democratic leaders took steps to move a stand-alone bill that would have repealed the widely criticized Medicare physician payment formula in advance of other health system reforms, laying the foundation for a new system to update doctor rates. But the legislation was blocked Oct. 21 by Republicans and Democrats who expressed worries about its cost.

The development means that a multiple-year Medicare payment solution will have to wait until after the Senate takes care of a national health system reform bill later this year, Senate Majority Leader Harry Reid (D, Nev.) said after the vote.

Sen. Debbie Stabenow (D, Mich.) on Oct. 13 introduced the Medicare Physician Fairness Act (S 1776), which would abandon the current physician pay formula and set future annual payment updates at zero, a revision that would cost roughly $245 billion over the next decade. By passing a bill that repealed the sustainable growth rate formula and eliminated its accumulated spending target debt, budget constraints that have hobbled permanent pay reform in the past would have been lifted, thereby allowing a new system to be crafted through future legislation.

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An AMA ad calls for the Senate to pass legislation to preserve access to health care for America's seniors.

"Enough is enough," Stabenow said before the vote. "Enough of running physicians up to the brink every year without them knowing what is going to happen. This legislation will wipe the slate clean."

But by a vote of 47 in favor to 53 opposed, the Stabenow bill failed to proceed beyond the first of possibly several procedural challenges that would have required 60 votes to overcome. A successful vote would have brought the legislation to the floor and limited debate on it.

The bill also would have been subject to a budgetary point of order. Because the costs of scrapping the payment formula wouldn't be paid for, the bill would have violated budget rules and raised the federal deficit.

"I don't know of a single person who wants to see reimbursement cuts to doctors who treat Medicare patients, but if Congress is going to step in and prevent it, we shouldn't do it by racking up more debt on the government's credit card," Senate Minority Leader Mitch McConnell (R, Ky.) said before the vote.

The deficit issue also resonated with some key Democrats. For instance, Senate Budget Committee Chair Kent Conrad (D, N.D.) said he could not support the Stabenow bill without finding money to offset its costs. He instead floated an offset, $25 billion measure that would prevent physician cuts and replace them with annual 0.5% pay increases for only two years, through 2011. At this article's deadline, Senate negotiators were considering Conrad's proposal or a one-year patch as a possible interim measure.

Democratic House leaders indicated earlier in October that they would take steps to strip a 10-year Medicare physician payment provision out of pending health system reform legislation and move it as a separate measure. That action also would have the effect of lowering the projected cost of the House reform bill.

But leaders in that chamber want to pass the payment solution in conjunction with statutory "pay-as-you-go" legislation. That move would allow the physician pay piece and several other measures to raise the federal deficit, but would require budgetary offsets for any other new spending going forward.

Doctors, seniors step up the pressure

The American Medical Association and other physician organizations came out in strong support of the Medicare Physician Fairness Act soon after its introduction. AMA President J. James Rohack, MD, said the Association was "deeply disappointed" with the vote and said the Senate had failed Medicare beneficiaries.

"There is widespread agreement among Republicans and Democrats that the formula is broken and needs to be repealed," he said. "Congress created the Medicare physician payment system, and Congress needs to fix this problem once and for all to fulfill its obligation to seniors, baby boomers and military families."

The AMA launched a television ad campaign Oct. 15 featuring seniors and physicians calling on the Senate to protect Medicare security by repealing the physician payment formula. The ad urged viewers to call their senators in support of the Stabenow bill.

Physician organizations also picked up key support from the seniors group AARP.

AARP and the AMA sent an Oct. 16 letter to the Senate urging lawmakers to pass the bill. "The continuing threat of steep Medicare payment cuts jeopardizes seniors' access to care and physicians' confidence in the government's commitment to funding a strong and reliable Medicare program," the letter stated.

Leaders of the AMA, AARP and the Military Officers Assn. of America appeared with Stabenow at an Oct. 20 news conference at the Capitol in an effort to push support for the legislation over the 60-vote margin.

But Rep. Wally Herger (R, Calif.) questioned AARP's endorsement of the measure, saying it was expected to result in more than $60 billion worth of Medicare premium increases for seniors. By law, 25% of any increases in Medicare Part B spending must come from beneficiaries' premiums unless Congress finds additional funds to keep premiums stable, he noted.

"It makes no sense for AARP to abandon their long-stated legislative priorities, which had included ensuring Medicare physician payment reform wouldn't increase seniors' premiums," Herger said.

A two-step process

Even if the Senate and House end up agreeing on some plan that involves repealing the current Medicare physician pay system, a new update formula would be needed if doctors were to receive rates that track their costs of providing care.

Congress could wipe the budgetary slate clean and eliminate reductions going forward, but Medicare still would need a new way to update physician pay, said Robert Doherty, senior vice president of governmental affairs and public policy for the American College of Physicians. "That will be a second piece of legislation that still needs to be developed. But you can't get to that step two until you get rid of the accumulated cuts."

Dr. Rohack reiterated the AMA's support for the permanent repeal language in the House health system reform bill. The House measure proposes establishing a new formula, starting in 2011, that would allow annual spending targets to grow based on a rate of the gross domestic product plus 1%. It also would provide a 5% Medicare bonus for physicians in specialties traditionally considered to be primary care.

The Senate Finance Committee version of health reform, which Democratic leaders still were busy merging with another bill, would replace the planned 21.5% cut in 2010 with a 0.5% increase, but it would not provide any additional updates in future years.

Dr. Rohack reiterated that a permanent Medicare pay overhaul -- not a temporary patch -- is an essential part of health system reform, regardless of the path it takes to enactment.

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ADDITIONAL INFORMATION

The price of delay

Part of the financial difficulty Congress has in enacting a long-term overhaul of the Medicare physician payment system is that lawmakers have passed only short-term patches to prevent annual cuts. Instead of creating a new baseline each time, they allowed spending target debt to accumulate, making the size of each subsequent planned cut -- and the projected 10-year cost of erasing the debt and freezing doctor rates -- progressively larger.

Year of cut prevented Bill that stopped cut Size of next cut New cost of 10-year freeze
2006 Deficit Reduction Act of 2005 5.0% $127.2 billion
2007 Tax Relief and Health Care Act of 2006 10.1% $177.7 billion
2008 Medicare, Medicaid and SCHIP Extension Act of 2007* 15.0% $220.1 billion
2009 Medicare Improvement for Patients and Providers Act of 2008** 21.0% $285 billion

* Stopped the 2008 cut through June 30, 2008.

** Stopped the 2008 cut for the remainder of the year and also stopped the 2009 cut.

Source: American Medical Association

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External links

AMA television ad calling on the Senate to pass S 1776, the Medicare Physician Fairness Act, to protect Medicare security by repealing the sustainable growth rate physician pay formula (link)

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