Congressional deadlock leaves Medicare 27.4% pay cut in place -- for now

House and Senate leaders reached an impasse over bills containing a temporary Medicare pay patch, with just days left until the Jan. 1 deadline.

By Charles Fiegl — Posted Dec. 20, 2011

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UPDATE: Medicare pay cut averted After a nearly weeklong standoff over a payroll tax cut package containing a temporary Medicare physician payment patch, Congress on Friday approved a bill that delays the scheduled pay cut from Jan. 1 to March 1. The pay patch means physicians will continue to receive 2011 pay rates for an additional two months while lawmakers seek a compromise on a package that could last through the remainder of 2012.

Congress is in a standoff over legislation that would prevent a 27.4% cut to Medicare physician payments in 2012.

House and Senate lawmakers are at odds with each other over temporary measures to stabilize Medicare pay rates and payroll tax cuts next year, part of a package of legislative priorities. After a bipartisan Senate agreement on the issue was rejected by House Republicans, the Obama administration said it would instruct Medicare contractors to hold off on processing physician claims starting Jan. 1 with the hope that Congress will reach an agreement soon after the new year.

The promised administrative delay offered little comfort to physicians and other advocates for Medicare beneficiaries who have been pushing all year for Congress to act. Physician organizations and patient advocacy groups expressed deep disappointment after the House blocked the Senate deal.

The impasse was cemented when the House voted 229-193 on Dec. 20 to disapprove of a Senate-approved, two-month freeze of current Medicare pay rates included in a two-month payroll tax extension package. Republicans in the House said they withheld their support because the length of the Senate agreement was too short and would require lawmakers to come back in the next congressional session and hash out yet another extension package by the end of February.

"A two-month patch is not what will give families, employers, doctors and the American people the long-term stability our country needs," said Rep. Michael Burgess, MD (R, Texas). "America needs jobs and long-term solutions. I am committed to staying in Washington until the job is done, and I encourage the Senate to do the same."

A week earlier, the House had passed a one-year payroll tax extension package that includes a two-year Medicare physician payment patch. That bill would increase Medicare rates by 1% in 2012 and by another 1% in 2013. But Democrats in the Senate would not support the House bill, objecting to budgetary offsets that would charge higher premiums to more higher-income seniors and cut funding for programs created by the health system reform law. Senate leaders said the two-month consensus, which passed overwhelmingly in the upper chamber, was needed to give lawmakers more time to come to an agreement about how to pay for a longer-term solution.

But enacting a bill with anything less than a one-year extension of the items included in the package would be irresponsible, said House Speaker John Boehner (R, Ohio). "It's time to stop the nonsense."

By rejecting the Senate two-month deal, Boehner and his fellow House Republicans called for the House and Senate to return to Washington between Christmas and New Year's Day to hold a conference committee that could iron out the differences between the competing measures. After the Dec. 20 vote, the GOP leader said he planned to recess the House at the end of the day's proceedings until after Christmas.

Senate Majority Leader Harry Reid (D, Nev.), however, said he would not recall any senators or appoint conferees until the House first adopted the two-month stopgap.

"I will not reopen negotiations until the House follows through and passes this agreement that was negotiated by Republican leaders and supported by 90% of the Senate," Reid said. The showdown means the Jan. 1 Medicare cut officially will take effect unless one of the leaders substantially changes his position. The Senate is not scheduled to reconvene until late January.

The American Medical Association does not support either of the short-term remedies being debated by lawmakers. After passage of the two-month Senate package on Dec. 17, Dr. Carmel criticized Congress for waiting until the last week of the legislative session, only to consider a temporary bill addressing Medicare's flawed pay formula.

"Seniors and disabled citizens in Medicare, military families served by Tricare, and the physicians who care for them deserve better from our elected officials," he said. "Patients and physicians legitimately fear that Congress will repeat the failure of 2010, when they missed multiple deadlines and Medicare bills went unpaid."

Internists also sharply criticized Congress for jeopardizing access to medical care for seniors and prolonging the "recurring SGR nightmare" for doctors.

"Instead of replaying the tired old script of arguing over whether the cut should be delayed for two months or two years, or something in between, Congress must do the right thing and enact a permanent solution," said Dr. Virginia Hood, president of the American College of Physicians.

Meanwhile, the Centers for Medicare & Medicaid Services announced it will hold physician claims for 10 business days starting Jan. 1. The Medicare agency, which similarly has held up processing in the past, would do so to avoid paying out claims at reduced rates and to give Congress more time to agree on legislation. If lawmakers cannot agree on a retroactive pay patch by the time claims processing starts up after Jan. 17, CMS will be forced to apply the 27.4% cut and then must automatically reprocess any paid claims at the higher rate if and when a solution is approved.

"The [Obama] administration is disappointed that Congress has failed to pass a solution to eliminate the sustainable growth rate formula-driven cuts and has put payments for health care for Medicare beneficiaries at risk," CMS said in a statement. "We continue to urge Congress to take action to ensure these cuts do not take effect."

The agency said the claims hold probably would have minimal effects on the operations of physician practices -- assuming Congress acts fast after the new year -- because contractors normally hold doctor payments for at least 14 calendar days.

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