Delay in Medicare’s 23% Doctor Pay Cuts Approved by Senate

For the fourth time this year, the Senate approved a one-month patch that will delay a 23% cut in Medicare payments to physicians until January 1, 2011. The action, passed on Thursday, November 18, is a result of an agreement backed by chairman of the Senate Finance Committee, Max Baucus (D-Montana), and senior Republican Charles Grassley of Iowa. The short reprieve will cost $1 billion over ten years and will be paid for by cuts in outpatient physical therapy services. The patch is expected to be passed in the House after Thanksgiving recess.

Long-term solution needed. Key Democrats and Republicans plan to use the reprieve as an opportunity to draft a longer-term fix, such as the 12- or 13-month solution supported by physician groups around the country and advocate organizations for senior citizens such as the AARP. A bipartisan panel is urging such a solution to be passed before the end of the year, to protect doctors from these enormous cuts until the end of 2011.

History of the payment cuts and congressional delays. The scheduled cuts in payments to doctors participating in the Medicare program were originally designed in 1997 to be phased in over many years. Called the “Sustainable Growth Rate” formula, payments to doctors were linked to growth of the economy as measured by the gross domestic product as a way to control spending. Starting in 2003, the cuts have been repeatedly delayed by Congress, causing the amounts to accumulate and forcing lawmakers into a continuous cycle of “patches.”

Concerned physicians fear instability of the program. The Sustainable Growth Rate formula has repeatedly frustrated doctors who were threatening to drop out of the Medicare program before latest cut went through on December 1, portending a Medicare crisis that could have undermined the health care program for millions of elderly and disabled along with active and retired military service members and their families. Thursday’s patch will ensure access to healthcare for these groups through the holidays.

Repealing formula necessary to end the cycle. A year-long fix to this problem would give Congress the time needed to create an entirely new system for paying doctors under the Medicare program. This would involve either offsetting $300 billion in costs with other spending cuts or by increasing the deficit.

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