subject: 1-month Medicare Doc Fix Approved By House [print this page] The house, in a bipartisan vote, approved legislation that postpones a Medicare reimbursement reduction of 23% for physicians. The reduction was to be from December 1, 2010 to January 1, 2011. The Senate already enacted the legislation and it now waits for President Obama's signature.
The lame-duck Congress now needs to pass additional legislation to postpone a 25% cut that is scheduled for New Year's Day. The Senate has introduced a bill that postpones the cut for 12 months. This was proposed by Senator Max Baucus (D-MT) and Senator Chuck Grassley (R-IA). The House has also introduced a bill to postpone cuts until January 1, 2012. This was proposed by Rep. John Dingell (D-MI) and 4 other Democrats.
According to the Congressional Budget Office (CBO), it will cost $1 billion over 10 years if the pay cut is delayed only until January 1, 2011. The House recently passed legislation that will offset the $1 billion cost with savings from other Medicare reimbursement rate cuts. These cuts include rates for multiple outpatient therapies performed on the same day, such as physical and speech therapy.
Congress has turned away from deficit spending, which makes it challenging to find money in spending cuts or revenue hikes to offset costs associated with postponing the Medicare rate reduction. According to the American Medical Association, extending the Medicare cuts to January 1, 2012 will cost the US Treasury approximately $15 billion.
Congress is trying to buy time by postponing the physician pay cut, in order to produce a permanent fix for the Medicare reimbursement issue. The permanent fix would mean getting rid of or revising the sustainable growth rate (SGR) formula. This formula was created by Congress in 1997 to control Medicare spending.
The formula was intended to control costs by allowing Medicare to recover overspending from one year by cutting physician reimbursement for the next year. The SGR formula sets an annual target for Medicare spending for physician services. This target amount is partly based on changes in the gross domestic product (GDP). If Medicare spending exceeds the target amount then physician reimbursement is reduced the following year to make up the difference.
Since 2003, physicians have faced SGR pay cuts every year. Congress, however, has delayed each one. There has been a build-up of the differences between targeted amounts and actual spending so each year the physician reimbursement cut gets larger.
The formula is considered flawed by organized medicine since costs for physician practices grow faster than the GDP. There is a campaign aimed at attaching physician reimbursement to the Medicare Economic Index (MEI). This index gauges inflation according to actual practice costs, which makes it much more accurate. According to the CBO, using the MEI formula will increase Medicare costs to about $330 billion through 2020. This amount is based on increasing pay by 1% to 2% through 2020.
A permanent fix is a necessity for Medicare. Congress must set itself a deadline and stick to it. Continued postponing of these important decisions will only increase the Medicare problems.
