Next Medicare "Doc Fix" May Be Punted to Early 2011

September 22, 2010

September 22, 2010 — Thanks to election-year politics, Congress may postpone a 23% cut in Medicare reimbursement, currently scheduled for December 1, for 2 or 3 months and let a new Congress in 2011 wrestle with a longer-term solution to the knotty reimbursement crisis, according to policy experts in organized medicine.

Any decision next year would hinge on the outcome of the November 2 election. Vote tallies that day could put Republicans in charge of the House — and even the Senate — as well as give them Tea Party allies in their opposition to deficit spending, which Democrats used to finance earlier postponements of the pay cut in 2010.

"What will happen is entirely a function of the election," said Kevin Burke, director of government relations at the American Academy of Family Physicians.

All the hubbub is over the sustainable growth rate (SGR) formula that Medicare uses to determine physician reimbursement. The formula sets an annual target for Medicare spending on physician services based partly on growth in the gross domestic product. If actual spending exceeds the target, Medicare is supposed to decrease physician reimbursement the following year to recoup the difference. Organized medicine calls the formula flawed because physician practice expenses have grown at a faster pace than the gross domestic product. Professional medical societies favor replacing the SGR formula with one more squarely based on the Medicare Economic Index, which measures inflation in the cost of operating a practice.

Each year, going back to 2003, Medicare spending on physician services has triggered a pay cut, and each year Congress has postponed it in a move called the "doc fix." Meanwhile, the difference between targeted and actual spending continues to accumulate, translating into bigger and bigger pay cuts.

A 21.2% reduction was scheduled for January 1, 2010, but Congress delayed the effective date 4 times — until March 1, April 1, June 1, and then December 1. Lawmakers missed the deadline to avert the cuts set for March, April, and June, and had to retroactively undo them — much to the consternation of physicians (the size of the cut has nudged up in the process). Congressional Democrats had sought a multiyear doc fix but found themselves continually blocked by Senate Republicans, who insisted that the legislation price tag be offset with cuts elsewhere in the budget.

The cost of keeping Medicare reimbursement payments at 2009 levels with inflation updates from 2011 through 2020 would come to $330 billion, according to the Congressional Budget Office.

Sacrifice Healthcare Reform for a Doc Fix?

Theoretically, Congress has between now and November 30 to enact its next doc fix, but nobody expects lawmakers to champion that controversial cause before the November 2 election. Both chambers of Congress are scheduled to adjourn October 8, although they may decide to do it sooner. What is likely to follow the November 2 election is a lame-duck session of Congress — meaning it will include legislators who have just been voted out of office. The Senate plans to reconvene on November 15 for 1 week and then adjourn for Thanksgiving, according to a spokesperson for Senate Majority Leader Harry Reid (D-NV).

What House Democrats have in mind after the election is not yet known, but Kevin Burke and other students of Capitol Hill anticipate that the House will follow the Senate's lead and also reconvene November 15 on a lame-duck basis for 1 week. Congress, they predict, will then vote during that narrow window to postpone the Medicare pay cut from December 1 to either February 1 or March 1 — in other words, another 2 or 3 months of breathing room.

"[The lame-duck Congress] won't feel a lot of power to make any significant extension," Burke told Medscape Medical News.

Any doc fix that a new Congress considers in early 2011 will apply to a reimbursement reduction of not 23%, but 29.5%, owing to an additional 6.5% cut that takes effect January 1.

Physicians should not get their hopes up about lawmakers permanently repealing the SGR in 2011, according to one policy expert in organized medicine, who spoke on condition of anonymity because he had not been authorized to speak to the press.

"There's talk about a doc fix through the end of 2011," the expert told Medscape Medical News. "Given the economy, the budget deficit, and the politics, people don't see a permanent fix as possible. It would be hard to come up with several hundred billion dollars."

The difficulty in passing a permanent fix stems from Republicans demanding that any doc fix, large or small, not add to the budget deficit. Instead, they want doc fix legislation offset with so-called "pay-fors" — spending reductions elsewhere in the budget.

If Republicans in November gain a majority of seats in the House, the Senate, or both, they may propose financing a long-term doc fix by repealing the new healthcare reform law, or portions of it. "We're not interested in that, but it could happen," said Shawn Martin, director of government relations for the American Osteopathic Association.

Kevin Burke of the American Academy of Family Physicians also envisions Republicans possibly using the Medicare reimbursement crisis as a pretext for gutting healthcare reform. However, there is just one catch. Any repeal "will never get past a presidential veto," said Burke.

Another Republican pay-for gambit, said Burke, is proposing a cap on noneconomic damages in malpractice litigation, which, along with other tort reform measures, could save the federal government $54 billion in healthcare costs over 10 years, as calculated by the Congressional Budget Office. However, Congressional Democrats, traditionally supported by trial lawyers, have opposed such caps as unfair to injured plaintiffs, and a Democratic president could veto that, too.

President Barack Obama is a wild card in more ways than one in the SGR poker match. Shawn Martin of the American Osteopathic Association reports that some lawmakers have discussed a 2-year doc fix that would position Congress to craft a longer-term solution after the 2012 presidential election, when the White House may have a new occupant.

Physicians Continue to Limit Exposure to Medicare

The uncertainty about Medicare reimbursement — will the big axe fall? — continues to frustrate physicians, Martin told Medscape Medical News.

"You can't plan ahead and make decisions like hiring new staff when you don't know what you're going to be paid," he said.

As a result of this frustration, physicians are limiting the number of Medicare patients they see. "What we're hearing about is a 1-in, 1-out approach," said Martin. "If a practice loses a Medicare patient, it replaces that patient. Otherwise, the number of Medicare patients doesn't change."

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