27% Medicare pay cut to return March 1 unless Congress makes new deal

A showdown over a payroll tax cut extension nearly caused the reduction to take effect Jan. 1, prompting CMS to prepare a claims processing hold.

By David Glendinning — Posted Dec. 27, 2011

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

The threat of an across-the-board Medicare physician pay cut was defused with just over a week to spare, but the congressional agreement only maintains rates for an additional two months before Congress must act again to avoid a steep reduction.

The House and Senate on Dec. 23 approved a two-month payroll tax cut extension package that included a two-month doctor pay freeze. That means physicians will continue to receive 2011 rates for Medicare services they provide through the end of February, and lawmakers will need to agree on a longer-term patch if they are to prevent the 27.4% cut from taking effect on March 1.

The scheduled Jan. 1 cut came very close to becoming a reality for Medicare physicians. House and Senate leaders were in a deadlock over items in the payroll tax cut extension package that largely were unrelated to the Medicare physician pay issue. The impasse broke just before Christmas, when House Speaker John Boehner (R, Ohio) and other House GOP leaders dropped their opposition to a short-term Senate plan after securing minor technical corrections to the bill and an agreement from Democratic leaders to appoint negotiators to work on a longer-term package.

The two-month consensus measure was cleared for President Obama's signature by unanimous consent votes in both chambers that registered no objections, a final outcome that was in sharp contrast to the level of rhetoric and entrenchment on both sides that marked the nearly weeklong stalemate over the issue. Optimism that Congress would beat the year-end deadline had faded quickly as the House passed a year-long payroll tax cut extension with a two-year Medicare pay provision, the Senate responded with a two-month stopgap measure, and House GOP leaders rejected the smaller bill as insufficient in duration.

The 27.4% cut looked likely enough in the final weeks of the year that the Centers for Medicare & Medicaid Services instructed the program's contractors to prepare to withhold physicians' 2012 claims for 10 business days. The claims processing hold was designed to give lawmakers a few additional weeks to agree on a retroactive Medicare payment patch before contractors were forced to apply the rate reduction. Under that scenario, any congressional passage that occurred after Jan. 17 would have required Medicare to reprocess at the higher rate any claims that already had been paid out for 2012 services.

Physician organizations slammed Congress for again waiting until the final weeks of the year before addressing the cuts mandated by the Medicare sustainable growth rate formula. Organized medicine for years has urged lawmakers to adopt a long-term reform plan that overhauls the SGR.

"With this brief reprieve from the massive 27% cut to Medicare payments, Congress now has to enact a real and fiscally responsible solution to this sorry cycle of scheduled cuts and short-term patches that compromises access to care for patients and drives up costs for taxpayers," said American Medical Association President Peter W. Carmel, MD. "Members of Congress need to use this time to work in a bipartisan manner to provide long-term stability for seniors, military families and the physicians who care for them."

Doctors' organizations gave their harshest assessments when it appeared likely that Congress would allow the deadline to pass and the cut to take effect, if only temporarily. The planned CMS-directed claims processing hold and lawmakers' assurances that the situation would be resolved soon did little to assuage the groups' concerns that Congress had endangered Medicare physicians and their patients by allowing the payment issue to become embroiled in an unrelated year-end political battle.

"To say we are outraged is an understatement," California Medical Assn. President James T. May, MD, said on Dec. 20, during the height of the congressional impasse. "Patients will be unable to see their physicians, resulting in delayed care and ultimately, increased hospitalizations and illnesses that could have been prevented. Congress isn't just playing with numbers -- they're risking the health of millions of seniors."

Although Congress since 2003 has patched physician pay rates either prior to SGR deadlines or soon afterward, physicians complain that the familiar cycle of lawmakers taking the debate right up until the final days before delaying the next cut -- and then only for as little as a month or two at a time -- causes frustration, fatigue and distrust of the program among physician practices that require a more stable Medicare pay environment. Dr. Virginia Hood, president of the American College of Physicians, described the situation as a "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," Dr. Hood said on Dec. 19.

Next steps before March

In the meantime, lawmakers have only a few weeks of scheduled legislative activity before the across-the-board SGR cut returns on March 1.

Senate Majority Leader Harry Reid (D, Nev.) and House Minority Leader Nancy Pelosi (D, Calif.) agreed to appoint conferees that can get to work right away on a longer-term package of payroll tax cut extensions, enhanced unemployment benefits and Medicare payment provisions, among other items. But both houses are not expected to be officially back in session again until the week of Jan. 23, and the patch will last only through Feb. 29.

Republican and Democratic lawmakers are still far apart on many issues under consideration, most notably on how to pay for the legislative priorities in the package. This includes the cost of preventing the Medicare physician pay cuts.

Under the initial House GOP plan, physicians would have received a 1% pay raise in 2012 and another 1% raise in 2013, but the additional spending would have been offset by requiring more higher-income Medicare seniors to pay higher premiums and reducing prevention funding under the health system reform law -- strategies that were roundly rejected by Senate Democrats. Another part of the plan to pay physicians more by cutting certain Medicare bad debt payments to hospitals also faced strong opposition by the hospital lobby.

When it appeared that the congressional impasse over the payroll tax cut extension package might not end before Jan. 1, several members of the GOP Doctors Caucus suggested that the Medicare physician payment piece might be separated from the rest of the measure and passed on its own. Conference negotiators might decide to take that route if it appears doctor pay rates might become a casualty of continuing disputes over unrelated items.

CMS officials again might direct contractors to hold physician claims if it appears Congress will miss the new March 1 deadline. But the agency's experience with holding claims the two times in 2010 that lawmakers passed retroactive payment patches have prompted officials to say that any future hold cannot last longer than 10 business days for fear that any more extensive period will strain cash flow for more vulnerable physician practices.

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn