Sequester Will Cut Medicare EHR Bonuses

March 06, 2013

Medicare incentive payments for meaningful use of electronic health records (EHRs) will suffer a 2% cut beginning April 1 just like Medicare physician reimbursement under a federal budget sequester of $85 billion through October 1, the Centers for Medicare & Medicaid Services (CMS) said yesterday.

The EHR bonus in 2013 under Medicare is $15,000 for first-time recipients who have demonstrated that they use EHRs in ways that improve the quality of care and lower its cost. A 2% reduction of that amount would come to $300.

The bonus is $12,000 for clinicians who received their first incentive payment in 2012 and $8000 for those who began receiving the payments in 2011, the first year of the program.

The maximum amount in Medicare bonuses that a clinician can receive is $44,000 over 5 years.

A CMS official disclosed the bonus reduction yesterday during the annual conference of the Health Information and Management Systems Society (HIMSS) in New Orleans, Louisiana, according to Robert Doherty, senior vice president of governmental affairs and public policy at the American College of Physicians, in an interview with Medscape Medical News.

In government parlance, a sequester means an automatic, across-the-board budget cut. The current $85 billion sequester, which applies to defense as well as domestic spending, stems from the failure of Congress to enact legislation in 2011 to reduce the budget deficit by roughly $1.2 trillion. Lawmakers earlier had agreed that if they could not reach such a deal, then a sequester at the same level would kick in on January 1, 2013. The prospect of arbitrary budget cuts for every branch of government was intended to pressure Congress to pass a more discriminating deficit-reduction plan.

Over the New Year's holiday, Congress postponed the sequester until March 1, when it took effect after Republicans and Democrats again stalemated over the best way to get federal finances in order.

The first installment of the sequester — $85 billion worth — affects the remaining 7 months of fiscal 2013, when ends September 30. Spending will decrease during this time by roughly 9% for domestic programs and 13% for defense programs. Social Security, Medicare benefits, and Medicaid are spared this budget axe.

Lawmakers crafted the sequester to go a little easier on Medicare reimbursement to healthcare providers, reducing it by only 2%.

The 2% cut will not affect EHR incentive payments that clinicians can earn under Medicaid as opposed to Medicare, because the former program is not subject to sequestration.