CMS Now Says Sequester Medicare Pay Cut to Kick in April 1

Mark Crane

March 01, 2013

Physicians treating Medicare patients will not see a 2% pay cut take effect until April 1 under the $85 billion federal budget sequester, the Centers for Medicare & Medicaid Services (CMS) said today.

Although the across-the-board budget cuts in the sequester technically begin just before midnight tonight, each federal agency will implement its cuts differently. As a result, physicians, hospitals, and other healthcare providers will not face the pay cuts for 30 days. A meeting between President Barack Obama and Congressional leaders of both parties today failed to avert the sequester.

"In order to implement the sequester for Medicare Parts A and B by April, CMS needs to provide 1 to 2 weeks' advance notice to the claims administration contractors to give them enough time to adjust their payment systems," a CMS spokesperson who asked not to be identified told Medscape Medical News.

"CMS is prepared to take sequestration into account when they calculate the April monthly payment for Part C and D plans on March 21 and communicate the amount to plans on March 22," the spokesperson said. "The sequester reductions will result in $11 billion in lost revenues to Medicare doctors, hospitals, and other providers."

Meanwhile, leaders of organized medicine again condemned the cuts and called on Congress and the president to reach a compromise.

"Our lawmakers have failed to act, and Medicare patients and physicians will now feel real pain in the form of new cuts that come at already difficult time for the nation's economy," Jeremy Lazarus, MD, president of the American Medical Association, said in a news release.

"The across-the-board cut will hit physicians particularly hard because of the fundamentally flawed Medicare physician payment system," he said. "Since 2001 Medicare payments for physician services have only increased by 4%, while the cost of caring for patients has gone up by more than 20%. A 2% cut widens the already enormous gap between what Medicare pays and the actual cost of caring for seniors."

The cuts threaten access to care for patients, slow innovation, and increase dysfunction within the Medicare program, he added. "Further cuts are counterproductive and stifle important progress while placing an unsustainable burden on physician practices."

Jeffrey Cain, MD, president of the American Academy of Family Physicians, described the sequester cuts as "blunt force trauma."

"Sequestration will slash thousands of dollars from family physicians' practice revenue," Dr. Cain said in a statement. "Because private insurers based their payments on Medicare rates, family physicians will see a domino effect as private insurance payment reflects the cuts imposed by the sequester. As small businesses operating on a razor-thin margin, family physicians will face a stark choice between putting their practices at risk and reducing the number of elderly and disabled patients they can see.

"Rather than rein in costs, sequestration payment cuts to health care providers will reduce access to needed care, increase the risk that preventable health conditions will develop or will worsen, and increase the chance that patients will ultimately require more intensive and expensive care," Dr. Cain said. "Meanwhile, the cuts likely will encourage other providers to shift costs to private payers or patients."

Earlier this week, American College of Physicians President David Bronson, MD, told Medscape Medical News he worries about the deleterious effects of budget cuts for agencies such as the Centers for Disease Control and Prevention, the US Food and Drug Administration, and the National Institutes of Health. A report released jointly by the American Medical Association, the American Hospital Association, and the American Nurses Association found that up to 766,000 healthcare and related jobs could be lost by 2021 as a result of the 2% cut in Medicare payments.

"Many physicians are worried about what will happen to the fundamental infrastructure of healthcare," Dr. Bronson said. "And they're concerned about a dysfunctional Congressional system that's not getting people's problems solved."

A retroactive solution to sequestration could possibly come late this month when a so-called continuing appropriations resolution expires March 27 and forces lawmakers to pass a new resolution to continue funding government operations. That legislation conceivably could apply a cure to the sequester.