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CBO Releases New, More Expensive Estimate for Medicare 'Doc Fix'

Elyas Bakhtiari, for HealthLeaders Media, May 7, 2010

Freezing the current Medicare physician payment rates would cost nearly $276 billion over the next 10 years, which is nearly 33% higher than the previous estimate of $207 billion, according to the Congressional Budget Office.

The cost increase is likely related to an improving economy, which tends to add more to the cost of health services, as well as demographic changes, CongressDaily reports.

Congress has already missed three deadlines in recent months for averting the 21% payment cut mandated by the sustainable growth rate formula. The cost of permanently repealing the formula has been a sticking point in the Senate, and legislators have instead voted to postpone the date of the cut or have had to freeze payments retroactively.

As a new June 1 deadline looms for Congressional action, the revised cost estimates may make a permanent or long-term fix tougher to pass. Earlier this year Congress exempted the SGR fix from new pay-as-you-go requirements, meaning the cost of freezing payments or increasing physician reimbursements would be added to the deficit.

After years of stagnant or declining reimbursement levels, physicians would prefer even a slight increase to 10 more years of frozen payments. However, the CBO estimates that a payment increase tied to the Medicare Economic Index would cost nearly $330 billion over the next decade, and a 2% update through 2020 would cost $374 billion. Both scenarios are unlikely given the high cost.

A cheaper option that has been floated by some is a five-year delay of the SG-mandated cut. That would cost only $88.5 billion through 2015, but physicians would then face a 30% reimbursement reduction and Congress would again have to delay or repeal an even more expensive cut.

A slew of medical associations is trying to keep the pressure on Washington, both through lobbying and an online petition that asks Congress to "please fix Medicare by developing a rational Medicare physician payment system that automatically keeps up with the cost of running a practice and is backed by a fair, stable funding formula."

Although a long-term delay could be viewed as a victory when the alternative is a steep payment cut, physician organizations, including the American Medical Association, are still campaigning aggressively for a permanent replacement for the SGR formula.

"It's well known that the budgetary gimmicks used by Congress to delay Medicare physician payment cuts increase the cost of reform and the size of the cuts, so these new CBO projections are not surprising," says J. James Rohack, MD, president of the AMA. "It's time for Congress to put aside the short-term actions that have more than quadrupled the price of a solution for American taxpayers and fix the problem once and for all for seniors, military families, and their physicians."


Elyas Bakhtiari is a freelance editor for HealthLeaders Media.

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