Medicare Cut for Physicians Helps Balance New Budget Deal

October 28, 2015

UPDATED — A bipartisan, 2-year budget deal that averts a default on federal debt, keeps the government running, and relaxes automatic spending limits hinges in part on a future Medicare pay cut for physicians.

Passed in a 266-167 House vote today, and soon to be voted on by the Senate, the agreement extends the federal government's ability to borrow money through March 2017 in the face of a November 3 deadline to raise the debt limit. It also allows military and domestic spending to exceed so-called sequestration caps by $80 billion over the next 2 years, potentially benefiting underfunded programs such as the National Institutes of Health. The sequestration caps were authorized by the Budget Control Act of 2011, which cut federal outlays across the board.

The sequestration relief is paid for over the next 10 years through a variety of budget ploys, all in the name of avoiding red ink. For example, the government would sell off 58 million barrels of oil from its emergency reserves over 6 years beginning in fiscal 2018.

And once again, lawmakers plan to shake some money loose from the Medicare piggy bank. The agreement keeps in place an annual 2% sequestration cut for Medicare providers an extra year, through fiscal 2025. This reduction, also part of the Budget Control Act of 2011, originally was set to expire in fiscal 2021, but Congress repeatedly extended it, most recently until fiscal 2024. In a posting on the House Speaker website, Rep. John Boehner (R-OH) said the latest extension would save $14 billion.

"Site-Neutral Payment" Delights Internists

The Congressional habit of squeezing Medicare reimbursement to avoid deficit spending has not sat well with organized medicine. Wayne Riley, MD, MPH, the president of the American College of Physicians (ACP), expressed consternation over the fact that the budget deal keeps the Medicare sequestration cut alive for another year. However, Dr Riley said in a news release that the agreement contains enough positives to earn his society's overall support.

One provision that wins applause from the ACP and other groups would equalize Medicare rates for hospital-employed physicians who practice off campus and for independent physicians. Right now, Medicare pays more for physician services when they're delivered in a hospital outpatient department (HOPD) than in an independent physician's office. When hospitals acquire physician practices, their offices are classified as HOPDs, and rates go up as a result. The ACP and the American Academy of Family Physicians belong to a group called the Alliance for Site-Neutral Payment Reform that believes this pay differential motivates hospitals to employ physicians, drives up healthcare costs, and jeopardizes the independent practice of medicine.

Under the budget deal, hospital-employed physicians who are off campus — and more than 250 yards away — would be paid according to either the regular Medicare fee schedule or the schedule for ambulatory surgery centers, depending on the services provided. However, this rate leveling would not occur until 2017, and it would not apply to hospital-employed physicians who were working off campus before the law was enacted.

The ACP praised two other parts of the bill. One would require manufacturers of generic drugs to pay an additional rebate to Medicaid if a drug's price has outpaced the inflation rate. The other spares Medicare beneficiaries from a dramatic spike in monthly premiums next year.

The bipartisan nature of the budget bill — forged by Democratic and Republican leaders in both chambers of Congress along with the White House — increases the odds of passage. The Senate must pass the bill by November 3 to meet the debt ceiling deadline.

Editor's note: This article has been updated to include the results of today's House vote on the budget bill.

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