House Passes Budget Deal With 3-Month 'Doc Fix'

December 12, 2013

The House today overwhelmingly passed a bipartisan budget agreement that will postpone a nearly 24% cut in Medicare pay for physicians from January 1 until April 1 and instead give them a 0.5% raise during that period.

The delay buys time for lawmakers to consider other bipartisan legislation to permanently repeal Medicare's sustainable growth rate (SGR) formula, which will trigger the massive pay cut next year. The Senate Finance Committee and the House Ways and Means Committee unveiled a joint proposal in October that would shift Medicare compensation from fee-for-service to pay-for-performance and consolidate 3 Medicare incentive programs, including meaningful use of electronic health records, into a single program. The committees then drafted official repeal bills that are mostly similar, but that will require reconciliation down the road. The Senate Finance Committee, for example, freezes Medicare rates for 10 years, whereas the House Ways and Means Committee gives physicians an annual 0.5% raise through 2016.

Both committees voted today to send their repeal bills to the floor of their respective chambers for a full vote, which may occur early next year. The House is set to adjourn on Friday for the holidays, whereas the Senate will work further into December.

Although today's legislative news generally bodes well for physician reimbursement, there was a rather large fly in the ointment. The budget agreement — now awaiting a vote by the Senate — preserves the annual 2% reduction to Medicare pay called for by the Budget Control Act of 2011, which instituted unpopular, across-the-board cuts called sequestration. The budget agreement approved by the House replaces $63 billion worth of sequester cuts over 2 years in both defense and nondefense programs, but not in Medicare. Instead, the bill would extend the 2% Medicare cut 2 years past its original expiration date of 2021.

The sequester's 2% pales in comparison to the SGR's 24%, but the sequester cut occurs every year, effectively translating into a 20% cut over 10 years.

"That's a slow way of implementing the SGR," said Reid Blackwelder, MD, president of the American Academy of Family Physicians, in an interview with Medscape Medical News.

The 2-year budget deal is the brainchild of Sen. Patty Murray (D-WA), chair of the Senate Budget Committee, and Rep. Paul Ryan (R-WI), who chairs the House Budget Committee. Their plan arose from Congressional gridlock over spending and budget deficits earlier this fall, which partially shut down the government for 16 days and almost caused the government to default on its debts. On October 16, lawmakers passed a stopgap measure that funded the government through January 15 and lifted the federal debt ceiling until February 7, allowing the government to borrow money to meet its current obligations. The bill required lawmakers to assemble a bipartisan, bicameral budget committee to break out of the gridlock and avoid another crisis.

The legislation would reduce the federal budget deficit by a net $23 billion.

Physicians Remain Focused on SGR Repeal

Dr. Blackwelder and other leaders of organized medicine are shaking off the 2% sequester cut and, instead, focusing their lobbying efforts on the abolition of the pesky SGR formula. Each year since 2002, the formula has mandated a reduction in Medicare rates for physicians, and each year except 2002, Congress has postponed it, causing the reductions to pile up.

Earlier this year, this exercise in Medicare math had called for a 24.4% reduction in Medicare rates. However, a recalculation by the Centers for Medicare and Medicaid Services (CMS) in November reduced the cut to 23.7%, according to the Congressional Budget Office (CBO). In the final version of its fee schedule for 2014, CMS said that the conversion factor for establishing a dollar figure for the relative value units used to price services fell from 24.4% to 20.1%. However, because of other factors, "the overall 2014 reduction in physician fee schedule payments required under the SGR methodology is unchanged."

The CBO recently revised the price tag of repealing the SGR formula and the savings that would otherwise accrue to the government. The agency now says SGR repeal will cost $116.5 billion over 10 years, down from a previous figure of $139 billion. A slowdown in Medicare spending on physician services accounts for the lower cost, which should make it easier for lawmakers to handle.


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