Published 1/1/2011
Mary Ann Porucznik

Congress Delays SGR Cuts for a Full Year

Is a permanent solution possible?

In 2010, Congress voted to override cuts to Medicare payments to physicians five times. In 2011, doctors hope that Congress will only vote once—on a permanent fix to the flawed sustainable growth rate (SGR) formula that has calculated continued reductions in physician payments since 2002.

Orthopaedic surgeon Sen. John A. Barrasso, MD (R-Wyo.), was among the leaders who helped pass the “Medicare and Medicaid Extenders Act of 2010” (MME) and was at its signing on Dec. 15, 2010. The legislation freezes payments to physicians under the Medicare and Tricare programs at current levels for 1 year, thus eliminating fears of physician payment cuts scheduled under the SGR, including an almost 25 percent cut that was to be implemented on Jan. 1, 2011.

Delaying the cut will cost the government an estimated $19 billion. The costs will be offset in two ways—by using funds (approximately $275 million) from the Medicare Improvement Fund, and by changing a provision of the new health care law that offers subsidies to lower-income people to help them buy health insurance, starting in 2014.

The bill allows the government to recoup more of any overpayments that people might receive if they misstate their income or earn more than they expect in a given year. Under the Patient Protection and Affordable Care Act (PPACA), repayments were capped at $250 for individuals and $400 for all families with incomes under 400 percent of the federal poverty level, currently $22,050 for a family of four. The MME links the limits to a person’s income, and repayments could be as high as $1,750 for an individual and $3,500 for a family.

In addition to reversing the physician payment cuts, the MME includes the following provisions that affect physicians:

  • Extends the Medicare work geographic adjustment floor by 1 percent
  • Extends the exceptions process for Medicare therapy caps
  • Extends the 5 percent payment increase for certain mental health services
  • Extends the outpatient hold-harmless provision

The legislation also provides $200 million for CMS to reprocess claims for services performed during the first 6 months of the year. When PPACA was enacted in March, it reversed reductions in the geographic practice cost indices and required retroactive adjustment of claims to Jan. 1, 2010. Thus millions of claims were in effect underpaid. Information on how or when the reprocessing will take place has not been released.

Now the real work
In his message to members, American Association of Orthopaedic Surgeons (AAOS) President John J. Callaghan, MD, noted, “Now, the real work begins.”

Congress will have a new look when it reconvenes this month, and the AAOS and other physician organizations hope that the year-long extension will give them time to educate newly elected legislators on the importance of a permanent fix to the SGR.

“We will work with our Congressional champions in the next 13 months to permanently repeal the flawed SGR formula and replace it with a viable solution that provides appropriate reimbursement for services and protects our patients from instability,” said Dr. Callaghan.

It seems that finally, after years of temporary measures, a permanent fix might be possible. President Obama has pledged to work with Congress “to address this matter once and for all.” According to a White House blog posting, “We all agree that this formula needs to be changed. Now’s the time to get it done.”