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Senate Delays Medicare Pay Cut until October 1

Mar 16, 2010

The Senate delayed the effective date of a 21.2% Medicare pay cut for physicians until October 1, 2010.

The postponement of the massive reduction is part of a bill that extends expired unemployment compensation benefits, subsidies for health insurance premiums for the out-of-work under the COBRA program, and various tax breaks. The bill, which the Democrat-controlled Senate approved in a 62 to 36 vote, now goes to the House for its approval. Most Republicans voted against the measure. One of them — Sen. Jeff Sessions (R-AL) — warned that it would increase the federal deficit by roughly $100 billion. 

When Congress enacts the bill and President Barack Obama signs it, it will be the third time in 4 months that lawmakers have delayed the Medicare pay cut of 2010. The reduction — triggered by the sustainable growth rate (SGR) formula that Medicare uses to set physician reimbursement — was originally scheduled to take effect January 1. However, Congress voted last December to delay it until March 1. Lawmakers followed up with a second extension to April 1.

Leaders of organized medicine routinely — and sometimes angrily — describe such deferrals as “kicking the can down the road.” It’s part of a pattern that began when Congress called off an SGR-mandated cut of 4.4% scheduled for 2003 and replaced it with a modest raise. The SGR formula sets a target for Medicare spending on physician services based in part on growth in the gross domestic product. If actual spending exceeds the target, Medicare is supposed to lower physician pay the next year to recoup the difference.

The formula has called for reductions every year since 2003, and Congress has prevented each one from taking effect in “kick-the-can” fashion. However, the SGR deficit — the difference between targeted and actual spending on physician services — continues to accumulate from year to year. Consequently, every temporary SGR “patch” only postpones the day of reckoning, and swells the size of the next reduction.

Physicians have lobbied Congress to scrap the SGR formula and replace it with one that would set reimbursement rates more in line with rising practice costs. Congressional leaders have repeatedly said they want to enact a permanent “doc fix,” as they call the SGR issue, but so far, the high cost of this fix — estimated to exceed $200 billion — has deterred lawmakers from following through.

The proposal for extending the effective date of the 2010 reduction to October 1 has been on the congressional table since February. Leaders of organized medicine have said they hope Congress finds the will to devise the elusive permanent fix between now and October 1.

Medscape, March 10, 2010