The House and Senate have approved legislation that would extend for one year the across-the-board cuts in certain discretionary government programs, known as the sequester, and apply $2.4 billion toward overhauling the Medicare payment system for physicians. President Obama is expected to sign the measure.
The bill, S. 25, reverses a $6 billion cut to military pensions that was included in the two-year budget agreement that cleared Congress in December 2013. The measure covers the cost by extending for one year the discretionary funding cuts—known as the sequester—for Medicare providers.
About $2.4 billion in additional savings generated by the provider cuts would be applied to a future increase in Medicare physician payments. The extra funds might be used as part of a comprehensive overhaul of the Medicare physician payment system or for an extension of the current physician pay rates after March 31, when the rates are scheduled for a cut of about 24 percent.
The $2.4 billion in “doc fix” funding included in S. 25 comes as efforts are under way in the House and Senate to repeal and replace the Medicare physician payment system. Medicare’s sustainable growth rate (SGR) formula each year calls for deep cuts in physician pay that are routinely canceled by Congress with a so-called doc fix.
To eliminate the need for regular doc fixes, House and Senate committees Feb. 6 announced agreement on legislation (H.R. 4015, S. 2000) that would repeal the SGR formula and replace it over several years with new physician payment models that would provide physicians with financial incentives to meet newly established quality guidelines.
March 31 Deadline
The deadline for Congress to pass either the overhaul legislation or another short-term doc fix is March 31, when the current Medicare physician pay rates are scheduled to be cut by about 24 percent under the SGR formula.
The two-year Bipartisan Budget Act of 2013 (H. J. Res. 59), which was signed into law Dec. 26, extended the higher-level Medicare reimbursement rates to March 31 to allow lawmakers time to come to agreement on replacement legislation.
Although members of the committees working on the legislation have agreed to the policies included in the legislation, they have yet to specify the funding cuts or new revenue that would provide offsets to help pay for the cost of implementing the SGR overhaul. The Congressional Budget Office has estimated the legislation would cost $128 billion over 10 years.
Another potential complication in moving forward is the recent confirmation of Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, to be U.S. ambassador to China.
Baucus has been a principal advocate of SGR reform, along with the leaders of the House Ways and Means and Energy and Commerce committees, which worked with the Finance Committee on the bipartisan legislation.
Takeaway: Lawmakers have a little over a month to agree on an SGR overhaul or they will have to extend the “doc fix” again.
