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Congress Patches Payment Gap for Medicare Doctors

Congress once again headed off a pay cut for doctors who treat Medicare patients by stopping a 25 percent decrease in the amount the federal government pays them to take care of seniors. The cut was scheduled to take effect on January 1.

Lawmakers have faced this issue every year since the 1990s, and every year they have granted doctors a reprieve without fixing the formula that triggers the pay cut. But what made this week different was that the Medicare pay cut became linked with the ongoing battle surrounding health reform.

Bolstered by their election success, there were rumblings on Capitol Hill that Republicans would try to tie any new bill with the doctors’ fix to include other provisions that would repeal or defund parts of the new health care law. Faced with the possibility of a standoff, leaders of both parties compromised and agreed to a deal that will pay for the “doc fix” by shifting money from the new health care reform law.

Lawmakers have decided to use some of the money that’s expected to be returned to the government from subsidies used for the health insurance exchanges, for Medicare payments to doctors. The health reform law provides government subsidies to lower-income and working-class Americans beginning in 2014 so that millions will be able to buy health insurance on an exchange.

But under the law, if some of those individuals start earning more money and are receiving too large a subsidy relative to their income levels, they would have to pay the government back. The original paybacks were $250 for an individual and $450 for a family. Under the new arrangement the penalties would be substantially more. So what lawmakers have essentially done is take money from one government program to fund another.

“The fix is helpful,” said Tricia Neuman, a vice-president of the Kaiser Family Foundation and director of its Medicare Policy Project. But, she added, “similar problems will resurface next year because the underlying sustainable growth formula for physician payments has not been reformed.”

President Obama applauded the vote and is expected to sign the bill into law soon.

The American Medical Association praised the House and Senate votes, but again said that Congress should figure out a permanent solution.

“Many physicians made clear that this year’s roller coaster ride forced them to make difficult practice changes like limiting the number of Medicare patients they could treat,” AMA President Dr. Cecil Wilson said in a statement. “This one-year delay comes right as the oldest baby boomers reach age 65, adding urgency to the need for a long-term solution before this demographic tsunami swamps the Medicare program.”

The payment issue goes back to the Balanced Budget Act of the ’90s that was drawn up by Congress in an attempt to keep Medicare costs under control. The law created a formula known as the sustainable growth rate (SGR).

The idea “was to limit the growth in spending for physician services by limiting the volume of services provided,” Neuman says. “But over time the formula produced a cut in fees.”

With doctors increasingly using new technologies to treat seniors who have more medical problems than younger Americans, the costs of health care have skyrocketed. So now organizations like the AMA and the American College of Cardiology* say the SGR formula punishes doctors by paying them less each year when their costs keep going up.

Surveys done by organizations that lobby on behalf of doctors and specialists say that up to 43% of doctors who see Medicare patients would stop seeing them if this year’s pay cut had gone through. And with continuing reports of fewer doctors taking Medicare patients, some experts believe that could have set off a crisis of care for hundreds of thousands of seniors who would have difficulty finding doctors to treat them.

Some experts also say doctors have more than offset the payment problem in the past by increasing the amount of services they provide, and can therefore bill to Medicare.

Neuman says that evidence so far does not show a major problem in the number of doctors who will take Medicare patients.

“There is some concern that reductions in fees could make it more difficult for seniors to find physicians who will see them,” says Neuman. “But at the moment, national surveys by MEDPAC (the Medicare Payment Advisory Commission which makes recommendations to Congress) and others find that the vast majority of Medicare beneficiaries do not have a problem finding a doctor who will see them, although there are anecdotal reports of such problems in some parts of the country.

The bottom line, she says, is that “access to physician services does not appear to be a major concern today, but this is certainly an area that needs to be monitored carefully to be sure seniors throughout the country, particularly low income and minority beneficiaries, have access to primary care physicians and specialists over time.”

The total cost of the one year “doc fix” is estimated to be $19 billion. The Congressional Budget Office says it would cost more than $275 billion to fix the payment system through 2020, and in the current political climate, neither Democrats nor Republicans seem willing to tackle a long term solution.

Until they do, the traditional holiday mad dash by the Congress to avoid destabilizing Medicare for 46 million American seniors will continue.

*Correction: The original version of this article incorrectly called the organization the “American College of Cardiologists.”

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