Congress May Delay Scheduled Medicare Pay Cut to March 28

February 24, 2010

February 24, 2010 — Talk about going to the edge of the cliff.

In this case, the cliff is a 21.2% Medicare pay cut for physicians scheduled for Monday — a cut that will force many physicians to stop seeing new and even existing Medicare patients, according to organized medicine. After months of casting about for a legislative solution to this crisis, Senate Democrats this week are considering a last-minute measure to delay the pay cut until March 28. A House vote would follow. Lawmakers could then use the delay to craft a long-term fix.

Given how the healthcare reform debate is sucking legislative energy from Congress, the Senate and House may not enact this postponement until after March 1. If that happens, the federal Centers for Medicare and Medicaid Services (CMS) could buy lawmakers more time — and spare physicians the shock of the massive cut — by not processing claims for services rendered in March for the first 10 business days of the month.

The rationale behind this gambit is that if Congress manages to call off the pay cut in early March, CMS can then process and pay that first batch of March claims at the current rate, assuming that lawmakers freeze Medicare reimbursement, as opposed to increasing it.

CMS resorted to this tactic in 2008, when physicians faced a 10.6% reduction in Medicare reimbursement on July 1 of that year. The cut was triggered by the infamous sustainable growth rate (SGR) formula that Medicare uses to set physician pay. CMS instructed its carriers to refrain from processing claims for the first 10 business days of July.

At the time, CMS noted that it was bound by law to pay electronic claims and paper claims no sooner than 14 and 29 days, respectively, after receipt. By sitting on claims for 10 business days, CMS did not have to cut checks reflecting the 10.6% cut until July 15. The hold didn't apply to claims for services performed before July 1, which were processed as usual.

Uncertainty About Medicare Pay Now an Annual Event

Congressional efforts to stop the 2008 pay cut were just as nerve-wracking for physicians as those this year. On June 25, 2008, the House passed a bill to freeze Medicare reimbursement for the rest of the year. The Senate couldn't muster enough votes to approve that legislation until July 9. Six days later, both chambers overcame a veto of the bill by President George W. Bush.

Because congressional action came so late in the game, CMS was forced to process and pay some claims from early July 2008 at the slashed rate. Those claims had to be reprocessed for physicians to receive full payment.

During the past 6 months or so, organized medicine has urged Congress to not only nullify the 21.2% reduction for this year but also repeal the SGR formula, which sets an annual target for Medicare spending on physician services based partly on growth in the gross domestic product. If actual spending tops that target, physicians are supposed to receive lower rates the next year to make up the difference.

The SGR has triggered reductions each year going back to 2003, but Congress has always replaced them at the last minute with a pay freeze or a modest raise. Meanwhile, the difference between targeted spending and actual spending on physician services has grown, leading to the gargantuan cut set for 2010.

Congressional Democrats in both the House and Senate initially included SGR fixes in their healthcare reform bills last year, but they eventually pulled them out to make their legislation less costly and more passable. The House approved a separate bill to repeal the SGR formula and replace it with one considered more physician friendly. The Congressional Budget Office estimated that the measure would add $210 billion to the federal deficit. A similar bill floundered in the Senate.

The best Congress could do in the waning days of 2009 was postpone the effective date of the 2010 cut from January 1 to March 1. At the same time, CMS prepared for the possibility of the 21.2% pay cut hitting physicians on January 1 by telling its carriers to hold physician claims for the first 10 business days of January for services performed during that time — shades of 2008.

What Will Your Medicare Paycheck Be on Monday?

The plan by Senate Democrats to delay the reduction a second time to March 28 was reported yesterday by Congressional Quarterly. A Congressional source corroborated the report to Medscape Medical News, as did Neil Kirschner, PhD, a senior associate in regulatory and insurer affairs for the American College of Physicians. "We're hearing the same thing," Dr. Kirschner said.

If Congress can't enact the delay until after March 1, it's possible CMS could refrain from processing March physician claims for the first 10 business days of that month, Dr. Kirschner explained. That's problematic, because physicians wouldn't have money coming in from Medicare. "They have payrolls to meet, like any other business."

The other option is for CMS to pay physicians at the reduced rate until a fix goes into effect, and then reprocess those claims at the full rate. Although this approach is complicated, it at least keeps money flowing to physicians, said Dr. Kirschner.

To Lori Heim, MD, president of the American Academy of Family Physicians, another episode of last-minute action by Congress leaves physicians feeling financially uncertain, and that's not good.

"What's awful is doctors not knowing what their paycheck will be next Monday," Dr. Heim told Medscape Medical News. "If I were a doctor thinking about any sort of expansion or upgrade in my practice, those plans would be on hold."

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