Senate to take up 1-year Medicare physician pay patch

Also, Congress exempts doctors from so-called red flags rule.

By Doug Trapp — Posted Dec. 7, 2010

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Key senators have reached agreement on a measure to block a Medicare physician pay cut through 2011. In another closely watched physician issue, lawmakers exempted doctors from the so-called red flags rule on security of financial data.

A bipartisan group of four Senate leaders is set to propose a one-year delay to the 25% Medicare physician pay cut scheduled to go into effect Jan. 1, 2011. The proposal would freeze physician payment rates for one year.

The agreement was reached Dec. 6 by the staff of Senate Finance Committee Chair Max Baucus (D, Mont.), Sen. Charles Grassley (R, Iowa), Senate Majority Leader Harry Reid (D, Nev.) and Senate Minority Leader Mitch McConnell (R, Ky.), according to a Senate aide.

The delay in Medicare cuts was expected to cost $19.2 billion. This would be paid for by expanding Internal Revenue Service recoveries under the national health reform law.

The law offers subsidies based on income to people who sign up for coverage through the health insurance exchanges spelled out by the legislation. If a person earns more than they projected that year, the IRS can collect a limited amount of the subsidies paid. The bipartisan agreement would raise that limit, increasing the subsidies the IRS can recover.

The Senate could vote on the proposal as soon as Dec. 8. A similar bill is under consideration in the House.

Organized medicine and others had sought a one-year reversal of the 25% pay cut. They also are advocating that with the cut averted, lawmakers spend 2011 coming up with a long-term solution for the sustainable growth rate formula, which sets physician pay. The formula, based on the economy and Medicare spending, since 2002 has resulted in negative updates, which Congress has overrode.

If the one-year patch is approved, that would be the fifth time in 2010 that Congress has passed legislation averting a cut in Medicare physician pay.

Meanwhile, a bill to exempt physicians and other professionals from the red flags rule on Dec. 6 passed the House, followed Senate passage four days earlier, and is headed to President Obama's desk for his signature.

The red flags rule required any creditor who held financial data on clients to install identity theft detection and monitoring programs. The rule is the result of the Federal Trade Commission's interpretation of the Fair and Accurate Transactions Act of 2003, which was intended to tighten security of financial data held by banks and credit card companies.

On Nov. 1, 2008, the FTC said physicians were covered under the red flags rule because they bill people for services after they are provided, and because they allow payment plans. The American Medical Association and others objected, and the FTC delayed its enforcement of the rule five times.

On May 21, 2010, the American Medical Association, the American Osteopathic Assn. and the Medical Society of the District of Columbia filed a federal lawsuit to prevent the FTC from holding physicians to the red flag rules. The AMA filed the lawsuit through the Litigation Center of the American Medical Association and the State Medical Societies.

A few weeks later, Federal Trade Commission Jon Leibowitz told an audience of physicians, "We feel your pain on red flags, and we want to fix it." He told delegates at the American Medical Association's Annual Meeting on June 14, "We agree with you that the red flags rule reaches too far."

AMA President Cecil B. Wilson, MD, said the FTC had too broadly defined creditors to include physicians and other professionals who would now be exempt under the bill.

"The AMA is pleased that this legislation supports AMA's long-standing argument to the FTC that physicians are not creditors," he said. "This bill will help eliminate the current confusion about the rule's application to physicians."

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