President Obama signs the Medicare and Medicaid Extenders Act of 2010, which for one year averts a 25% Medicare pay cut for physicians. Witnessing the signing, behind and to the president's left, are AMA President Cecil B. Wilson, MD, and AMA Board of Trustees Chair Ardis Dee Hoven, MD. Official White House Photo by Pete Souza

Permanent SGR fix becomes focus after passage of Medicare pay patch

Organized medicine hails the one-year reprieve approved by Congress and signed by President Obama. Now sights are set on 2011 for a new payment model.

By Chris Silva — Posted Dec. 20, 2010

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With no Medicare physician pay cuts assured for 2011, organized medicine plans to press for overhauling a payment system based on an economic calculation measure it believes is woefully flawed. Such a move has President Obama's support.

In December, Congress overwhelmingly passed legislation that will delay for one year scheduled cuts to doctors' Medicare payments, including a 25% cut slated to go into effect Jan. 1, 2011. The measure keeps Medicare physician pay at its present level, including the 2.2% increase physicians received when Congress overrode an SGR-mandated pay cut in June. Obama signed the legislation on Dec. 15.

The law gives physicians a reprieve for at least one year from having to worry about cuts in Medicare pay, as mandated under the sustainable growth rate formula. Since 2002, the formula, based on the economy and Medicare spending, has calculated continued declines in physician pay, which Congress then has overridden. Congress overrode those cuts five times in 2010 alone.

The American Medical Association and others in organized medicine said the one-year patch was critical to ensuring that seniors had access to physicians.

"Patients now will have great confidence that physicians will be able to provide the care they need through 2011," said Robert G. Luke, MD, chair of the board of regents at the American College of Physicians.

Obama publicly has supported delaying the steep cut in Medicare physician payments and has called on Congress to develop a permanent fix in 2011 to the SGR.

"It's time for a permanent solution that seniors and their doctors can depend on, and I look forward to working with Congress to address this matter once and for all in the coming year," Obama said.

No proposal for overhauling or replacing the SGR has been put forth in Congress, though one is expected sometime after the House and Senate convene in January 2011. Organized medicine pressed for a one-year patch to buy time to focus on SGR overhaul, instead of SGR patches.

"The AMA will be working closely with congressional leadership in the new year to develop a long-term solution to this perennial Medicare problem for seniors and their physicians," said American Medical Association President Cecil B. Wilson, MD. "This one-year delay comes right as the oldest baby boomers reach age 65, adding urgency to the need for a long-term solution before this demographic tsunami swamps the Medicare program."

Figuring out a permanent solution

The 112th Congress will have some templates to follow as it considers replacements for the SGR formula.

For example, Sen. Debbie Stabe-now (D, Mich.) introduced the Medi-care Physician Fairness Act on Oct. 13, 2009, that would have abandoned SGR and set future annual payment updates at zero.

The revision was estimated to cost about $245 billion during the next decade. But the bill failed to collect the 60 votes necessary to move it to the floor for a vote.

And on Nov. 19, 2009, the House passed by a 243-183 vote a bill that would have scrapped the SGR and cost about $210 billion over 10 years. However, the Senate failed to pass companion legislation.

Congress will have a new look in 2011, and the AMA and other physician organizations will have a different political landscape to negotiate. Republicans now enjoy a 242-193 edge in the House. Democrats still maintain control in the Senate, although at a much closer margin, 53-47.

Despite the failed votes in Congress, repealing the SGR and fixing the payment system is a concept that has bipartisan support.

The Senate bill version of the Medicare & Medicaid Extenders Act of 2010 grew from a deal struck by four Senate leaders. Senate Finance Committee Chair Max Baucus (D, Mont.), ranking minority member Sen. Charles Grassley (R, Iowa), Senate Majority Leader Harry Reid (D, Nev.) and Senate Minority Leader Mitch McConnell (R, Ky.) took the lead in crafting the bill, coming up with a deal that allowed the legislation to go to the Senate.

The delay in Medicare cuts is expected to cost $14.9 billion. Other provisions affecting physicians' pay and patients' share of costs bring the total cost of the measure up to $19.2 billion. The legislation would be paid for by expanding Internal Revenue Service recoveries under the health reform law. The law offers subsidies based on income to people who sign up for coverage through insurance exchanges. If a person earns more than he or she projected, 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 AMA has contended that the longer Congress waits to adopt a long-term solution, the higher the cost. In 2005, the Congressional Budget Office estimated that the cost of a 10-year payment freeze would have been $48.6 billion. The most recent CBO estimate places that cost at more than $275 billion over 10 years.

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Benefits beyond the 25%

The Medicare and Medicaid Extenders Act of 2010 includes more than the reversal of a 25% Medicare physician payment cut scheduled for Jan. 1, 2011. Among other provisions, all of which expire Dec. 31, 2011:

  • Extending the Medicare work geographic adjustment floor by 1%. The indexes help determine how much physicians in different parts of the country are paid for the work they do in providing care.
  • Extending the exceptions process for Medicare therapy caps. Medicare typically cuts off coverage for outpatient physical therapy and speech-language pathology services when the patient has incurred a combined $1,860 in spending on the services. This ensures that more beneficiaries can receive coverage beyond the caps.
  • Extending the 5% increase in payments for certain Medicare mental health services.
  • Extending the outpatient hold-harmless provision. Most beneficiaries are covered by a hold-harmless provision that protects them from premium increases when there is no hike in Social Security benefits.
  • Revising the Medicare Improvement Fund, which makes a limited amount of money available to enhance Medicare Parts A and B.

Source: Medicare and Medicaid Extenders Act of 2010

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Medicare owes doctors $200 million, AMA says

Physicians are asking the Centers for Medicare & Medicaid Services to explain how it plans to pay out more than $200 million in overdue payments.

The American Medical Association sent a letter Dec. 10 to Health and Human Services Secretary Kathleen Sebelius noting how CMS has failed to make several retroactive Medicare payment increases for physicians. As of this article's deadline, HHS had not responded.

In addition to freezing Medicare payment rates at the current 2.2% level for one year, the Medicare and Medicaid Extenders Act included $200 million for CMS to process certain pay increases. The letter was signed by medical societies from all 50 states and the District of Columbia and 57 national medical specialty societies.

The organizations outlined six provisions in the Patient Protection and Affordable Care Act that called for physicians to be paid at new payment levels. These provisions stated that the new levels would be retroactive and apply through all of 2010, including the months before the legislation's enactment.

Those payments were not processed, however, and physicians are waiting to receive payments from the first half of the year, the letter said.

"These missing payments are having a real impact," said AMA President Cecil B. Wilson, MD. "Seventy-eight percent of office-based physicians are in small practices. Waiting for these reimbursements can cause them particular hardship as they struggle to keep their practices viable and care for Medicare patients."

Some states were due to receive big increases because of changes in the geographic practice cost index, including North Dakota (7%), Montana (6.7%), Wyoming (6.4%) and West Virginia (5.6%), the letter said.

The final 2010 fee schedule rule also undervalued several cardiology codes because of calculation errors made by CMS.

"Many physicians are not in a position to rely on IOUs from the government," Dr. Wilson said in the letter. "We urge CMS to provide physicians with prompt information about how these claims will be handled, and to make the reimbursement process as quick and simple as possible."

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