Medicare pay cut averted for now as pressure builds for 12-month fix

Organized medicine supports the yearlong patch to provide time for lawmakers to work out a permanent solution to the pay problem.

By Chris Silva — Posted Dec. 6, 2010

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President Obama signed legislation on Nov. 30 that delays a sharp decrease in Medicare physician payment rates, giving Congress more time to hammer out a longer-term agreement that organized medicine hopes will postpone additional cuts at least through 2011.

The House approved the Physician Payment and Therapy Relief Act of 2010 with a voice vote on Nov. 29, averting a 23% cut in Medicare physician pay that was scheduled to take effect Dec. 1. The Senate had passed the bill before Thanksgiving.

"President Obama is pleased Congress has passed legislation that will prevent payment cuts to doctors from taking effect [Dec. 1]," said White House press secretary Robert Gibbs. "The president urges Congress to now pass a one-year extension to ensure seniors maintain access to the doctor they know and trust over the coming year. Passing this one-year extension is important, but it is no substitute for a long-term fix. The president has long called for a sustainable solution, and we look forward to working with Congress to further address this matter."

Organized medicine is hopeful a one-year agreement will be worked out before Jan. 1, 2011, at which time the cut grows to 25%. Senate Finance Committee Chair Max Baucus (D, Mont.) and Sen. Charles Grassley (R, Iowa), the panel's ranking GOP member, issued a joint statement Nov. 18 stating that they are working together "to secure a mutually agreeable way to pay for the yearlong cost of the physician formula as well as other extenders."

Finance Committee leaders said they are confident that a solution will be reached before year's end. "We now need to work together to pass a long-term extension so we can ensure seniors and military families can continue to have access to their doctors, treatments and medicines," Baucus said.

The American Medical Association was pleased that doctors were not hit with the pay reduction, but it is urging lawmakers to embrace the bipartisanship conveyed by Baucus and Grassley and continue negotiations on a yearlong extension. The latest congressional intervention represents the fifth time in the past year a short-term patch was needed to avoid a cut in physician payment rates.

"While this short-term delay helps ensure that physicians can continue to care for seniors for the next month, congressional action early in December to stop the cut for one year will inject stability into the Medicare program and ensure that Medicare delivers on its promise of health coverage for America's seniors," said AMA President Cecil B. Wilson, MD. "It is crucial that Congress act well before the Jan. 1 deadline so there are no disruptions in care for seniors."

That the oldest baby boomers will start the new year as the first of their generation to turn 65 and begin relying on Medicare only adds to the urgency of stabilizing the payment system, Dr. Wilson added.

AARP also is imploring Congress to act on a 12-month extension.

"I am calling on you to block this pay cut for one year and to work together in 2011 to find a solution that will provide stability to patients and their doctors once and for all," said A. Barry Rand, AARP's CEO. "For more than a decade, Congress has failed to fix the flawed Medicare physician payment system, which has resulted in larger and larger cuts and made it more expensive to fix over time."

Recent AARP surveys show that more than 80% of its members are concerned that if a steep pay cut went into effect, seniors could lose access to their doctors. Moreover, the AMA in November released a survey of 1,000 adults showing that 94% believed a pay cut posed a serious problem for seniors.

The one-month patch, estimated to cost $1 billion, will be paid for using the Medicare savings from a new Centers for Medicare & Medicaid Services policy that reduces payments for multiple therapy services provided to patients in a single day, according to Baucus and Grassley, who authored the measure. The bill, which was unanimously approved by the Senate on Nov. 18, also provides relief to therapists by shrinking that reduction from 25% to 20%.

Working for 2011

The AMA, AARP and other organizations believe the best plan for now is to pass a 12-month extension. Then lawmakers could work on a long-term solution in 2011 to the sustainable growth rate, part of a formula that aligns physician pay updates with the performance of the nation's economy and cuts rates for all doctors if yearly spending totals exceed federal limits.

The SGR formula, however, has resulted in negative updates since 2002.

"A 12-month extension will give the physician community and Congress time to work together in establishing a three- to five-year SGR patch," said Roland Goertz, MD, president of the American Academy of Family Physicians. "This longer period will, in turn, provide time to collect data on payment models, such as the patient-centered medical home and accountable care organizations, analyze that data and develop payment reform based on that analysis."

But Democrats and Republicans have had trouble agreeing how to pay for a long-term postponement of Medicare payment cuts, and a 12-month patch would cost approximately $15 billion. According to budgetary pay-as-you-go rules, legislation that prevents SGR-driven Medicare pay cuts is one of the exceptions that does not need to be offset. Deficit concerns have been raised repeatedly in the past year, however, requiring the need for offsets to attain the votes needed to pass the measures.

Before the most recent legislation was passed, a House bill was introduced on Nov. 18 that would have extended physician pay by 13 months and provided a 1% update through the end of 2011. That bill was introduced by a group led by Rep. John Dingell (D, Mich.) and other House Democrats.

The measure -- the Medicare Physician Payment Update Extension Act -- had seven co-sponsors as of Dec. 1. As of this article's deadline, it was unclear if bill sponsors would revise it to a 12-month version.

"When Congress comes together to address this problem again in 30 days, I urge my colleagues to pass a permanent solution, or at minimum, pass a yearlong extension so that we can ensure some stability to the Medicare program," Dingell said.

The AMA has said the longer Congress waits on adopting a long-term solution, the higher the cost. In 2005, physicians faced a scheduled Medicare cut of 3.3%, and the Congressional Budget Office estimated then that the cost of a 10-year payment freeze would have been $48.6 billion. The most recent estimate by the CBO now places that cost at more than $275 billion over 10 years. The AMA projects that the cost of a permanent overhaul will jump to $396 billion in three years and to $513 billion in five years.

If at least a 12-month extension is not reached to avoid the pending 25% cut, then seniors could have a more difficult time getting care.

An AAFP survey released Nov. 22 found that nearly 13% of family physicians would consider no longer seeing any patients -- either Medicare or non-Medicare -- if Congress fails to override a steep cut in payment rates. About six in 10 respondents also said they may be forced to stop accepting new Medicare patients.

The Connecticut State Medical Society on Nov. 29 issued a survey showing that doctors would stop seeing patients unless a pay cut were averted. About one-third of the 360 physicians surveyed would be forced to limit the number of new Medicare or Tricare patients they treat. The pay rates also affect patients covered by Tricare, the government's program to insure members of the military and their dependents and military retirees.

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Medicare pay cut timeline

Congress' late-November action marks the fifth time in the past year that legislators had to intervene to avoid a steep cut in Medicare payments to physicians. Typically, doctors have had to deal with a potential cut only once a year. These dates reflect when President Obama signed legislation concerning physician Medicare pay.

Dec. 19, 2009: Defense Appropriations Act prevents a 21% pay cut from taking place on Jan. 1, 2010, by freezing rates for two months.

March 2, 2010: The Temporary Extension Act of 2010 stops the 21% pay cut and freezes rates through March 31. The cut technically had taken effect on March 1, but the Centers for Medicare & Medicaid Services held physician claims for 10 business days, giving Congress more time to approve a patch retroactive to the first of the month.

April 15, 2010: A 21% Medicare physician payment cut is postponed until June 1. The cut had taken effect April 1 as lawmakers engaged in a budget fight over how to pay for the bill. CMS again stepped in and advised claims to be held while an agreement was worked out.

June 25, 2010: A measure is signed that reverses a 21% cut through Nov. 30 and increases physician pay by 2.2%. CMS said any claims that had been paid out at the reduced rate would be reprocessed automatically with the 2.2% update.

Nov. 30, 2010: Physician Payment and Therapy Relief Act freezes rates for one month and avoids a Medicare payment cut that is now calculated to be 23%. The cut is slated to increase to 25% by Jan. 1, 2011.

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