Medicare Meltdown: Congress Seeks Payment Formula Fix

Presdient Obama signed legislation last month to temporarily prevent a 12.2 percent Medicare payment cut scheduled to take effect Jan. 1. The freeze lasts until Feb. 28, during which Congress is expected to come up with a permanent solution to what some consider a flawed payment system.

On Oct. 30, the Centers for Medicare & Medicaid Services (CMS) issued its final 2010 Medicare physician payment rule. In it, the agency set the payment cut at 21.2 percent using the sustainable growth rate (SGR) formula set forth in federal statute.

The cut would have left physicians with few options, said Ronald B. Kuppersmith, MD, an otolaryngologist in College Station, Texas. “If you’re losing money seeing patients, then you have to either stop seeing those patients or you have to cut costs, which means that employees could lose jobs,” he said.

The American Medical Association (AMA) and state and specialty medical societies are pressing for an end to the SGR formula, which began in 1997. Under the formula, the payment update for a year is determined by comparing cumulative actual physician expenditures to cumulative target expenditures in the prior year. If actual spending exceeds the target, payment is cut. The AMA and other physician organizations argue that the methodology for establishing the target spending level does not adequately account for increased spending caused by technological innovation and Medicare benefit expansions. Congress has acted to temporarily prevent the reductions six times since 2003, but it has not changed the baseline for calculating target expenditures. According to AMA materials, “essentially, by temporarily stopping the SGR cuts through the approach of moving the cuts to future years, Congress has created an enormous ‘credit card’ debt that has no hope of being paid off unless the SGR debt burden is eliminated and the physician payment system is rebased.”

Physician have long warned that if the scheduled reduction were to take effect, more physicians would opt out of Medicare and TRICARE, the military health program that has the same payment rate as Medicare. “Access to care and choice of physician for seniors, baby boomers and military families is at serious risk, and Congress must fix the payment formula once and for all this year,” said AMA President J. James Rohack, MD.

House Bill Offers Clean Slate

Physician attempts to dismantle the SGR were set back when House leaders stripped Medicare payment provisions from the health system reform bill before its House passage on Nov. 7, 2009.