How debt deal could squeeze Medicare pay even more

The agreement doesn't address the SGR cut and raises the specter of an additional $10 billion to $15 billion per year in reduced doctor pay.

By Charles Fiegl — Posted Aug. 8, 2011

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The last-minute agreement that lawmakers and the White House reached to avoid a default on the nation's debt also considerably raises the stakes for physicians pushing for congressional action on Medicare payment before the end of the year.

The debt measure President Obama signed into law on Aug. 2 does not address the sustainable growth rate formula that is set to slash doctor pay by 29.5% on Jan. 1, 2012. On top of that, doctors treating Medicare patients could see another cut -- projected at $10 billion to $15 billion annually -- if a special congressional committee fails to agree on a long-term deficit reduction plan that can pass Congress and be signed into law during this session.

The debt legislation starts by reducing budget deficits by $917 billion between 2012 and 2021, but those cuts would not touch Medicare or Medicaid programs. Under the second phase of the plan, a special bipartisan committee of 12 members of Congress will meet to find an additional $1.5 trillion in deficit reduction over 10 years. In exchange, Obama could raise the statutory federal debt ceiling by an equal amount, meaning the nation will not be at risk of default again until 2013.

In raising the debt ceiling, the Budget Control Act of 2011 relieved growing concerns that Medicare payments to physicians, hospitals and others would be put on hold if the U.S. Treasury Dept. were unable to borrow enough money to pay all the government's debts.

Associations representing physicians had hoped Congress would address the SGR issue when it raised the debt ceiling. Now, payment reform could be addressed by the joint committee, whose members will be named by congressional leaders from both parties. The budget act sets up the panel to tackle short- and long-term deficit issues, including entitlement changes, said American Medical Association President Peter W. Carmel, MD.

"[We] anticipate the Medicare physician payment issue will be among the issues the committee will address, as everyone agrees that a 30% cut in payments to those who care for Medicare patients would hurt seniors' access to the health care they need and deserve," Dr. Carmel said.

The committee's ultimate goal, however, will be to reduce total federal deficits, and a long-term SGR repeal would result in higher federal spending, in the neighborhood of $300 billion over 10 years. Panel members including such a provision in a final proposal would need to increase the amount of reductions they find elsewhere in the federal budget in order to hit their $1.5 trillion net savings target.

The committee probably will focus on various possible reforms to the Medicare program, said Marc Goldwein, policy director for the bipartisan Committee for a Responsible Federal Budget in Washington. Previous commissions convened to reduce the nation's deficit, such as a panel commissioned by the White House, offer examples of ideas the joint committee might consider:

  • Restricting first-dollar coverage in Medicare supplemental insurance, or Medigap, plans.
  • Extending Medicaid prescription drug rebates to patients eligible for Medicare Part D coverage.
  • Reducing excess payments to hospitals for graduate medical education programs.
  • Cutting Medicare payments for bad debts, such as for hospitals whose patients have unpaid deductibles and co-pays.
  • Accelerating home health savings under the health system reform law.

The joint committee also might consider proposals that would be difficult to pass, Goldwein said. For instance, Obama and House Speaker John Boehner (R, Ohio) have discussed raising the age for Medicare eligibility to 67 from 65. Increasing patient premiums for higher-income seniors and allowing the government to means-test people seeking low-income assistance could be on the negotiating table, too.

"The super committee cannot avoid looking at Medicare, Medicaid or Social Security," Goldwein said. "Those programs are responsible for our continued debt problems."

Medicare also can improve program efficiency in a number of ways, but that would not produce enough future savings to lower the deficit, he said. "You're going to have to look at the beneficiary side."

What happens if the committee fails

The clock will be ticking for the special committee once it is convened. The panel has until Nov. 23 to sign off on a plan to cut $1.5 trillion in deficits, and Congress would need to approve the measure by Dec. 23.

In the event that committee members or Congress fail to agree on a large enough measure, the debt act automatically would impose up to $1.2 trillion worth of deficit cuts. They would be spread out across most government sectors, including Defense and Medicare, with the exception of certain programs such as Social Security and Medicaid. The figure would be reduced by the amount of any smaller deficit reductions that lawmakers do agree upon. The fail-safe option would enable Obama to increase the nation's debt limit by as much as $1.2 trillion.

When it comes to Medicare, the fail-safe would limit the maximum size of the automatic deficit reduction to 2%, but benefits for enrollees could not be altered. That means reductions would need to come instead from reduced pay to physicians, hospitals and others treating Medicare patients. The annual hit for doctors -- on top of any SGR-mandated cuts that are not blocked -- would be $10 billion to $15 billion per year if lawmakers cannot agree on any deficit plan.

"It guarantees benefits but, by ignoring Medicare physician payment issues, it potentially denies the actual medical care those benefits cover," said Roland Goertz, MD, president of the American Academy of Family Physicians.

The hospital industry, which already will sustain significant pay reductions through cost-saving measures in the health reform law, also is worried about the implications of lawmakers failing to strike a deal in time. "The act rhetorically protects seniors, but this protection is illusory," said Chip Kahn, president and CEO of the Federation of American Hospitals. "Reducing critical Medicare payments to community hospitals will affect the ability of caregivers to ensure access to the timely care beneficiaries deserve and expect."

A 2010 AAFP survey concluded that significant cuts in Medicare rates would lead 13% of family physicians to shutter their practices. Seven in 10 doctors said they would be forced to limit the number of Medicare patients they can accept.

"If our health care policy fails to ensure the financial viability of physician practices, preserving benefits does little good," Dr. Goertz said. "In the end, many patients in need will go without care because there will be no one to see them."

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A tight timeline

The Budget Control Act of 2011 sets a brisk schedule for a select bipartisan committee of 12 lawmakers and the rest of Congress to approve a plan reducing the deficit by at least $1.5 trillion between 2012 and 2021. At the same time, lawmakers are racing the clock to avert the largest Medicare physician pay cut scheduled to date.

Key deadlines:

Aug. 16: Members of the joint committee are named.
Sept. 16: The joint committee holds its first meeting.
Oct. 14: Regular House and Senate committees submit any recommendations they have to the joint committee.
Nov. 23: The joint committee votes on legislation.
Dec. 2: The joint committee sends an approved bill to the president, House and Senate.
Dec. 23: Congress votes on the joint committee's bill.
Jan. 1, 2012: Medicare physician pay is cut by 29.5% unless Congress intervenes.

Source: Budget Control Act of 2011 (link)

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