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Unformatted text preview: 1 h e a lt h p o l ic y b r ie f w w w. h e a lt h a f fa ir s .o r g Health Policy Brief n ov em b e r 3 , 2 0 1 1 2011 Project HOPE The People-to-People Health Foundation Inc. 10.1377/hpb2011.18 Medicare Payments to Physicians. Congress faces another deadline before automatic cuts will kick inand once again may consider a major overhaul. whats the issue? A problematic formula for paying physicians under Medicare has been in place for years and, since 2003, has been stipulating that there should be mandatory cuts in payments to doctors. However, Congress has consis- tently postponed those cuts and instead raised Medicare physician fees slightly or held them constant. Unless Congress acts again soon, payment rates for physician services will be reduced by 27.4 percent starting January 1, 2012, accord- ing to a new administration calculation. Congress could simply pass another short- term doc fix, as it did most recently in De- cember 2010. But there is growing agreement among lawmakers and policy makers that it would be preferable to find a multiyear plan to stabilize payment rates coupled with a general redesign of the physician payment system. The challenge is that the Congressional Budget Office has estimated that such a doc fix would increase the federal deficit by about $300 billion or more from 2012 to 2021. Many analysts suggest that the Joint Select Commit- tee on Deficit Reductionthe so-called Super Committee that is charged with identifying $1.5 trillion in budget cuts over 10 years should include a permanent payment rate solution, and a way of paying for it, in its rec- ommendations due in November 2011. This policy brief examines the various pro- posals and their possible effects on federal spending and on health care providers. whats the background? Medicare pays physicians using a fee schedule, or list of prices. This list sets a fixed maximum price for each of more than 7,000 defined ser- vices, such as an office visit, a particular sur- gical procedure, or a specific diagnostic test. Current law requires the Centers for Medicare and Medicaid Services (CMS) to update these prices each yearusing a formula that, in the- ory, assures that total per capita spending for physician services does not grow faster than the increase in the gross domestic product (GDP). targeting spending: The formula has its roots in concerns dating back to the 1980s about the rapid rate of growth in the number of services that physicians were providing to their Medicare patients. In 1989 Congress put in place a fee schedule system and a method for annually updating fees that was intended to slow growth in volume. In 1997 Congress revisited this approach and put in place a sys- tem of spending targets based on a sustain- able growth rate formula, often referred to as the SGR....
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- Fall '11