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Another Medicare pay patch on the horizon?

Enactment of a debt limit bill would allow for a five-year Medicare rate freeze without a requirement to find offsets.

By Chris Silva — Posted Feb. 8, 2010

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Amid calls from physician organizations for a permanent Medicare pay solution before a March 1 cut takes effect, lawmakers moved a provision that would require Congress to find budgetary offsets for anything larger than a five-year freeze of current rates.

By a 60-39 vote, the Senate passed a $1.9 trillion hike of the federal debt limit, raising the ceiling to $14.3 trillion. The bill also would reinstate statutory "pay-as-you-go" provisions, which generally require lawmakers to find money in the budget to pay for any new mandatory spending or tax cuts. But several items, such as the extension of some tax cuts from the Bush administration, would be exempt from the new requirements, allowing Congress to run up the federal deficit to pay for them.

At this article's deadline, the House was preparing to vote on the Senate version of the bill.

Legislation to prevent Medicare physician pay cuts also would be exempt from the statutory pay-go requirements, but only to a point. Up to $82 billion worth of higher Medicare pay to doctors could be approved without the need to find offsets. This corresponds to a five-year freeze of current Medicare rates that would be followed by additional rate cuts.

Even after enactment of the debt ceiling bill, lawmakers still would need to approve separate legislation to reverse upcoming pay reductions, including the 21.2% cut that will kick in March 1. If Congress passes any bill with a larger price tag than a five-year freeze, additional offsets would be required. The House has passed a long-term Medicare pay overhaul with a projected 10-year cost of about $210 billion, roughly $130 billion more than the proposed exemption.

The American Medical Association is calling on the Senate to accept the House measure rather than take up any new short-term bill. At a Jan. 21 news conference with AARP and the Military Officers Assn. of America, AMA leaders restated their position that they will not support any more patches -- whether through a five-year deal or any other temporary measure -- to the payment formula.

"Every year, seniors, military families and their physicians are unwilling players in a game of legislative chicken as Congress takes us to the brink before stopping Medicare cuts at the last minute," said AMA President-elect Cecil B. Wilson, MD. "These Band-Aid fixes Congress has taken to avert previous cuts have only grown the problem -- increasing the size of future cuts and the cost of a permanent solution."

Paying the bills

The enactment of statutory pay-go rules could make it more difficult for lawmakers to approve some new spending in the future -- including for reversals of future Medicare doctor pay cuts -- because lawmakers in most cases would not be able to incur deficit spending to do so. But some in Congress said that would be a good thing.

"The pay-as-you-go rule that we adopted today would apply the same discipline to the federal budget that American families use every day in their own lives: In order to spend a dollar, we have to have that dollar in our wallet," said Senate Majority Leader Harry Reid (D, Nev.).

Others on Capitol Hill said that even though raising the debt limit was necessary to prevent the federal government from essentially going into default, they were pleased that pay-go accompanied the bill to implement an important future check on the system.

"To be clear, I would have much preferred a stricter statutory pay-go," said Senate Budget Committee Chair Kent Conrad (D, N.D.). "But the bottom line is the statutory pay-go provision being adopted today will serve as a useful additional barrier against the adoption of legislation that does not have broad bipartisan support."

Republican lawmakers also cheered the move to restore teeth to the pay-go concept. Although House rules in recent years have required offsets, the fact that they were not written into statute meant that lawmakers could bypass them easily. The GOP laid the blame for the pay-go failure on the Democratic leadership.

A House Budget Committee policy paper released Feb. 1 by the panel's Republican members cited "a pay-as-you-go enforcement scheme that has allowed deficits to soar from $161 billion since the rule was implemented in 2007 to $1.6 trillion this year."

Democrats have said the Bush administration and Republicans are largely to blame for both the deficits and the inability of Congress to control them.

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