Lancaster Medical Society News

CBO Sees 29.4% Medicare Rate Cut for Docs in January

Modern Physician Reports:
CBO sees 29.4% Medicare rate cut for docs in January

By Andis Robeznieks
Posted: June 15, 2011 - 2:45 pm ET
Tags: Legislation, Medicare, Physicians, Policy, Reimbursement

Although CMS actuaries have called a 29.4% reduction in physician Medicare payment implausible, a Congressional Budget Office report repeated that this would be the cut come January using Medicare’s sustainable growth-rate mechanism.

The report goes on to explore the costs of different SGR-reform “cliff” and “clawback” options, as well as recommendations by President Barack Obama’s fiscal commission.
The clawback approach, taken by Congress in the Medicare Modernization Act of 2003 and the Deficit Reduction Act of 2006, includes a short-term adjustment in payment without adjusting spending targets and assumes recoupment of spending over targets down the road. Cliff legislation allows a short-term increase in payment in a method that results in a large payment-rate reduction the following year. Congress has passed such legislation every year since 2007, producing the cumulative effect of the projected 29.4% “cliff.”

“I think this is a good assessment of where we are,” said Miranda Franco, a government affairs representative for the Medical Group Management Association. “I think this is a good message to Congress about how dire this really is.”

The 10-year costs of different options range from $21.5 billion, which includes a 35% payment cut in 2013, to $388.5 billion, which includes an annual 2% increase through 2021 after resetting the SGR or forgiving all over-target spending that cumulatively accrued up to Dec. 31, 2010. Another option would use the same resetting formula and then link updates to the Medicare Economic Index. That option has been projected to cost $358.1 billion from 2012 through 2021.

Two positive factors affecting physician reimbursement were the removal from spending targets of the costs associated with physician-administered drugs and lower-than-expected growth in physician Medicare spending in 2010, which resulted in a decrease in the amount of money that that had to be recaptured by the SGR and reduced “downward pressure on future updates to payment rates,” according to the report.

Franco said the removal of physician-administered drug costs from spending targets was something the MGMA had advocated for but that it “does not fix the problem” of the SGR methodology.

“The target system has not worked,” she said. “I don’t see why we would look at maintaining it.”