One-Year Medicare Doc Fix Clears Congress, Goes to President Obama

December 09, 2010

December 9, 2010 — A bill to freeze Medicare pay for physicians through the end of 2011 instead of cutting it by 25% on January 1 cleared Congress today and goes to President Barack Obama for his signature.

The House passed the bipartisan legislation in a voice vote this morning following Senate approval yesterday.

This week's Congressional "doc fix" was spurred by warnings from organized medicine that a massive reduction in Medicare reimbursement would cause a large number of physicians to stop seeing Medicare patients. Military families also would have found their access to physicians jeopardized because their TRICARE coverage is based on the Medicare fee schedule.

In addition to freezing physician compensation at current Medicare levels, the legislation extends expiring Medicare payment policies and funds minor changes to Medicare, Medicaid, and the Children's Health Insurance Program. All told, the cost of the legislation tops $19 billion, with nearly $15 billion devoted to the doc fix.

Counting today's action, Congress has delayed the Medicare pay cut on 5 separate occasions this year amid much wrangling on how to finance it.

The latest legislation pays for itself, mostly by tweaking the Affordable Care Act, and in particular, its treatment of tax credits that help individuals and families purchase health coverage. This amendment will save the federal government $19 billion.

The Medicare pay cut that has bedeviled organized medicine and Congress alike is triggered by the sustainable growth formula that Medicare uses to set physician reimbursement. The formula pegs reimbursement to growth in the gross domestic product. Organized medicine contends that the formula is flawed because physician practice costs exceed gross domestic product inflation. The formula has mandated Medicare rate reductions every year going back to 2003, but Congress has postponed each one. Because the reductions accumulate over time, physicians found themselves looking at a reimbursement abyss on January 1.

Lawmakers hope that the 1-year freeze will give them enough time to hammer out a permanent solution to the Medicare reimbursement crisis that physicians find more equitable and Congress finds affordable. They may turn to the recent recommendations of a bipartisan commission created by President Obama to reduce the federal budget deficit. A report drafted by the commission's cochairmen, Alan Simpson and Erskine Bowles, proposed freezing Medicare rates through 2013, reducing them by 1% in 2014, and then instituting a new pay formula in 2015 that rewards providers for the quality — not quantity — of their services.

The report won 11 of 18 votes on the commission, but not the 14 needed to bring it automatically before Congress. However, Republican and Democratic commission members agreed that the report gives Congress numerous options for reducing the deficit.

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