Medicare physician pay cut reversal in Senate's hands

A House-passed bill to patch rates through 2011 awaits Senate action. Meanwhile, CMS is again holding Medicare claims to give lawmakers more time to act.

By Chris Silva — Posted June 7, 2010

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When Congress returns from its Memorial Day recess on June 7, the Senate will be racing the clock to stem damage from a 21% cut in Medicare physician pay that officially went into effect June 1.

This is the third time this year the cut has gone into effect before it could be reversed, and physician organizations say they are growing increasingly frustrated by what they perceive as a lack of urgency on the part of lawmakers to fix the situation in a more permanent fashion. As it did the two previous times, the Centers for Medicare & Medicaid Services said it would instruct Medicare contractors to hold June claims for 10 business days, giving the Senate more time to pass the House bill before the program starts sending doctors' payments at the reduced rate. The extension runs out after June 14.

The extenders bill that the House approved on May 28 includes a 19-month patch, under which doctors would receive a 2.2% raise for the rest of 2010, retroactive to June 1, followed by another 1% raise in 2011. But in 2012, physicians are scheduled to receive a 33% cut as the system reverts to the old pay formula baseline.

The Medicare pay portion of the bill was carved out and voted on separately by House lawmakers, passing by a vote of 245-171. The Senate plans to vote on the full package of extenders, which also would continue unemployment and health assistance programs that are expiring, and address other priorities.

The latest broken Medicare pay deadline followed a flurry of legislative activity that saw longer-term proposals drafted and discussed before being discarded due to cost concerns on the part of some lawmakers.

At one point, House leaders entertained the idea of a short-term Medicare pay plan equivalent to a five-year freeze of physician rates starting in 2011. That was scaled back to a 3½ year plan that would have replaced cuts with raises through 2013. The Obama administration and some physician organizations came out in support of that plan, only to see it reduced even further.

The new 19-month patch would boost pay to physicians by an estimated $23 billion over 10 years. This is down from the $88.5 billion that the five-year freeze equivalent would have cost, and the $63 billion that the 3½ year plan would have cost.

Even with the reduced price tag for the physician pay portion of the bill, fiscal conservatives in the Senate said they would have a hard time voting for an extenders package that is projected to cost approximately $113 billion and add $54 billion to the deficit over a decade.

Pressing for action

The American Medical Association and other physician organizations have been imploring lawmakers to pass a permanent solution to replace the sustainable growth rate formula that helps determine Medicare physician pay.

The Senate recessed on May 28 just hours before the House passed its pay patch, causing some to blame the upper chamber for allowing the 21% cut to take effect.

"The AMA will work vigilantly during the congressional recess to alert seniors and military families to the Senate's disregard for their health care needs," said AMA President J. James Rohack, MD. "Our physician and patient grassroots networks are fully engaged, and we'll be getting the word out in the media as well. Through a range of activities, we will make sure that voters are aware of the Senate's failure to address this problem."

On June 3, the AMA launched a new, multimillion dollar nationwide advertising campaign urging Americans to contact their senators and push them to act. "The AMA will not sit silent while Senate inaction guts Medicare's physician foundation," Dr. Rohack said. "Senators need to hear from people in their home states to avoid a health care crisis caused by the Senate's inability to take action on this critical issue." The campaign includes print, radio and television ads critical of the Senate for leaving Washington, D.C., before solving the problem.

A May online survey of more than 9,000 physicians conducted by the AMA found that practices already are making changes based on Medicare pay problems. About 17% of all physicians who accept Medicare patients are restricting the number of beneficiaries they see. More than 30% of respondents who were identified as primary care physicians said they limit their Medicare patient load. For both sets of physicians, the top two reasons they cited were that Medicare rates were too low and that the constant threat of cuts made Medicare an unreliable payer.

Lori Heim, MD, president of the American Academy of Family Physicians, noted that while physicians are compensating their staff members and paying their bills at 2010 prices, under the SGR formula they are being paid at 2001 rates.

"Now, because Congress has failed to avert a 21.3% cut, family physicians are earning less today than they earned a decade ago," Dr. Heim said. "Family physicians are outraged that Congress has jeopardized the health care security of millions of elderly and disabled Americans who depend on Medicare and Tricare."

The American College of Physicians came out in strong support of the 3½ year plan -- which would have set higher rates for primary care services -- and ACP President J. Fred Ralston Jr., MD, said his organization appreciates the interest the Obama administration has shown in a longer-term approach to fixing the Medicare payment system. But the fact remains that time after time, too many members of Congress get cold feet when longer-term plans come up for consideration, he said.

"Many of the legislators who refused to support legislation to avert the SGR cut and move to a better payment system have cited the deficit," Dr. Ralston said. "Yet the fact is that Congress' recurring failure to enact a long-term plan to replace the SGR will result in bigger cuts and greater budget outlays in the future."

A "nagging problem"

Some lawmakers also say they are troubled by the inability of Congress to enact a long-term solution to the persistent Medicare pay issue.

Rep. Michael Burgess, MD (R, Texas), who voted in favor of the 19-month extension, described the situation as a "nagging problem" that was ignored in the health system reform bill that passed earlier this year.

"When will our nation's doctors finally get the permanent fix to the Medicare payment formula that they need and deserve?" he asked. "America's seniors are finding it more and more difficult to find Medicare doctors, and today's so-called doc fix will do nothing more than kick the can down the road one more time."

But fiscal conservatives said the burden of adding additional costs to the nation's budget deficit would be too great to ignore. "We have to start taking concrete steps to curb unnecessary deficit spending, and that means taking a close look at anything that is not offset or that we designate as emergency," said Rep. Stephanie Herseth Sandlin (D, S.D.), co-chair for administration of the Blue Dog Coalition, a group of fiscally conservative Democrats.

Henry Aaron, PhD, a senior fellow of economic studies at the Brookings Institution in Washington, D.C., said lawmakers' penchant for approving short-term fix after short-term fix is a form of procrastination that might have some strategic reasoning behind it.

Before the patches expire, policymakers may be ready to try to push doctors into new forms of health care delivery, such as bundled payments or accountable care organizations, he said.

"The threat of actually implementing the fee cuts called for by SGR but never enforced could goad physicians to agree to delivery system reforms they would otherwise resist," Aaron said. "It could be a useful weapon for Congress to keep in the drawer."

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The bill's other priorities

The House on May 28 passed an extenders bill that would reverse Medicare physician pay cuts and replace them with raises. The bill, awaiting Senate approval, also includes:

  • Enhanced unemployment assistance
  • Enhanced COBRA health coverage for the unemployed
  • Small business loans
  • Economic development bonds
  • Business tax relief
  • Individual tax cuts

Source: House Ways and Means Committee

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