$2 billion in temporary Medicare add-ons set to expire

The American Medical Association and others are urging Congress to maintain pay floors and other sunsetting provisions.

By Charles Fiegl — Posted Oct. 3, 2011

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Nine expiring Medicare fee schedule provisions could cut annual payments to physicians and other health care professionals by about $2 billion starting in 2012.

The House Ways and Means health subcommittee held a Sept. 21 hearing to debate whether Congress should renew the exceptions in Medicare's pay system, known as extenders. The expiring provisions would affect nearly all health professionals.

"When these policies were created, many were billed as short-term or one-time payment adjustments," said Rep. Wally Herger (R, Calif.), the subcommittee chair. "However, Congress has extended most of them on an annual basis for the last decade."

At the hearing, American Medical Association Board Chair Robert M. Wah, MD, spoke in favor of four of the extenders, but he also discussed the need for overall payment system reform. He said extending the payment provisions helps a flawed system limp along, but Congress needs to do more by eliminating the sustainable growth rate formula that helps calculate physician pay. The SGR is set to cut 2012 rates by 29.5%.

"We have a lot of symptoms here we are treating, but we're not treating the underlying disease," he said. Congress should extend several expiring payment policies while it examines overhauling the entire system, Dr. Wah and representatives from other organizations said.

Current law, for instance, requires Medicare to adjust payment rates for services on a geographic basis. The program typically adjusts physician pay on a budget-neutral basis, so increases for one geographic area would be offset with decreases in another locality. But in recent years, Congress has established a geographic physician work floor to prevent positive adjustments from negatively affecting pay in other areas.

In addition to extending the work floor, Congress should continue a 5% pay increase for certain mental health services, allow for the direct billing of the technical component for pathology services and continue paying higher rates for bone density screenings for osteoporosis, Dr. Wah said. These four exemptions, which are scheduled to expire Jan. 1, 2012, would cost $800 million to extend for another year.

"The AMA understands the subcommittee's concern about the costs associated with continually extending modified payment policies for these and other expiring provisions," Dr. Wah said in his testimony. "The AMA believes, however, that the additional funding that has been allocated for many of these services has been necessary in the absence of a complete overhaul of the Medicare payment system."

Health economist and consultant A. Bruce Steinwald voiced opposition to the extenders being considered for renewal because he said they undermine the pay system, increase service volume and are costly. There is not enough evidence to support payment floors, which have been established to ensure access to services in rural areas and other underserved regions, he said.

"Although there are ways to improve the accuracy of the payment formulas, floors and other exceptions, if extended, tend to reduce the value of such improvements," Steinwald said.

But such relief is needed for rural health professionals, said H. Stephen Williamson, president of the American Ambulance Assn. Medicare patients represent half of ambulance transports, and an add-on ambulance pay provision can increase rates by more than 20% in extremely remote areas. That add-on expires Jan. 1, 2012.

"For a majority of ambulance service providers, the temporary relief has made it possible to maintain adequate ambulance crew levels, stock ambulances with proper supplies, and continue to provide high-quality and lifesaving ambulance services," Williamson said.

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Expiring Medicare pay policies

About $2.3 billion in temporary Medicare payment provisions are set to expire within months. Organized medicine groups and other health professionals have urged Congress to reauthorize the so-called extenders.

Extender Expiration date Added annual spending
Inpatient section 508 wage reclassifications Oct. 1 $300 million
Outpatient therapy cap moratorium Jan. 1, 2012 $900 million
Geographic physician work payment floor Jan. 1 $500 million
Outpatient hold harmless Jan. 1 $200 million
Independent lab direct Medicare billing Jan. 1 $100 million
Mental health add-ons Jan. 1 $100 million
Ambulance add-ons Jan. 1 $100 million
Increased DXA payments Jan. 1 $100 million
Small rural hospital clinical lab hold harmless July 1, 2012 less than $50 million

Source: House Ways and Means health subcommittee, Sept. 21

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Obama wants Congress to repeal SGR

A White House long-term debt reduction plan delivered to Congress on Sept. 19 assumes that lawmakers will overhaul the sustainable growth rate formula that helps determine physician pay. "Failing to do so simply masks the worsening long-run deficit," the plan reads.

The AMA commended President Obama for stating that serious plans to address federal deficits must include an SGR repeal. "Honest accounting of our nation's debt should not assume $300 billion in Medicare physician cuts, which Congress has rejected repeatedly because of the significant, detrimental impact those cuts would have on patients' access to care," said AMA President Peter W. Carmel, MD.

However, Obama did not detail where lawmakers can find the money to pay for an SGR repeal. The special bipartisan congressional committee directed with finding at least $1.2 trillion worth of spending cuts would see that target figure increased if it were to commit new federal spending to preventing physician pay cuts.

The president's plan does recommend spending reductions elsewhere in the federal health budget, totaling $248 billion in 10-year savings from Medicare and $72 billion from Medicaid and other programs. The plan would cut $42 billion in Medicare payments for postacute care services in skilled nursing, long-term-care and inpatient rehabilitation facilities. Indirect medical education add-on payments would be cut starting in 2013 for a savings of $9 billion.

Obama also would strengthen the Medicare Independent Payment Advisory Board created by the health system reform law, effectively directing the panel to find larger Medicare cuts by lowering predetermined targets for total program spending.

Organized medicine groups have opposed the IPAB and have asked Congress to repeal the board. The president's debt plan also omits medical liability reform, a potential deficit reduction measure that has the support of physician organizations.

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