Medicare Pay Cut Appears Destined to Hit on June 1

May 27, 2010

May 27, 2010 — The dreaded 21.3% reduction in Medicare reimbursement for physicians will likely take effect June 1 as scheduled following the failure of House and Senate Democrats tonight to pass the necessary legislation to stop it.

The Memorial Day recess for Congress officially begins Monday, but lawmakers will start to leave the nation's capital tomorrow. Democratic leaders who have tried to avert the massive Medicare pay cut say they simply have run out of time to cut a deal. They might have beat their deadline if it had not been for staunch opposition from both Republican and Democratic lawmakers who argued against the deficit spending involved in the legislation.

Anticipating that Congress might not act in time to avert the June 1 pay cut, the Centers for Medicare and Medicaid Services has instructed its carriers this week to hold payment on claims with June service dates for the first 10 business days of the month. That way, if Congress retroactively postpones the pay cut early next month, carriers would process the suspended claims at either the current reimbursement rate or any higher — and temporary — rate that lawmakers might approve.

The Centers for Medicare and Medicaid Services has taken this route before when a rate decrease took effect, only for Congress to avert it after the fact.

Organized medicine has lobbied Congress hard to block the pay cut. It warns that many physicians would respond to the reduction by turning away seniors, as well as military families covered by TRICARE, which bases its fee schedule on Medicare rates. Physicians on average depend on Medicare for 31% of their revenue, according to the Center for Studying Health System Change.

Unease Over Deficit Spending Stymied a Legislative Solution

House Democrats were hoping to postpone the pay cut until January 1, 2012, and increase Medicare rates 2.2% for the rest of the year and 1% in 2011. To become law, the measure also would have needed Senate approval. Senate Democrats had said earlier that they would legislate through the weekend to finish what the House started.

The solution to the Medicare reimbursement crisis — dubbed the "doc fix" by lawmakers — was part of the Democrat-sponsored American Jobs and Closing Tax Loopholes Act that also would have extended unemployment compensation benefits and a slew of tax breaks as well as ended other tax breaks. House Democrats, however, could not muster enough votes to pass the bill due to the red ink it represented, even after they had whittled down the doc fix to satisfy Congressional budget hawks, which included Blue Dog Democrats. The original version of the bill would have extended the effective date of the pay cut to January 1, 2014.

As the legislation stood earlier today, it would have cost $127 billion in total spending, raised $43 billion in new revenue, and increased the federal deficit by $84 billion. The doc fix accounted for $23 billion of the cost — down $40 billion from before.

Late Thursday night, House Democrats announced that they would split the American Jobs and Closing Tax Loopholes Act into 2 bills — one for the doc fix, and the other for everything else — and vote on them separately Friday. However, Senate Democrats said Thursday night that even though they would meet again on Friday, they would not vote on any House bill until they reconvened on June 7 after the Memorial Day recess. Part of the problem for Senate Democrats is that they anticipate the same kind of stonewall opposition to deficit spending that their House counterparts encountered.

A spokesperson for Senate Majority Leader Harry Reid (D-NV) told Medscape Medical News that Senate Democrats will seek unanimous consent for a 14-day deferral of the Medicare pay cut as well as the unemployment benefits and tax breaks, but that Republicans are likely to block it. Democrats expect that Republicans will propose their own short-term extension, drawing on unspent funds from last year's economic stimulus legislation. In turn, Democrats plan to block the Republican measure because it diverts money from job creation, the spokesperson added.

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