Congress OKs Doc Fix, Payroll Tax-Cut Extension

[UPDATED 12:50 PM ET: The U.S. House of Representatives voted 293-132 Friday morning to pass a compromise bill that would delay the impending 27% cut in Medicare pay rates for 10 months. The Senate voted 60-36 to pass the measure.]

Congress has passed a legislative package that would delay massive Medicare reimbursement cuts for physicians for 10 months. The deadline to resolve the sustainable growth rate formula issue is now postponed until the end of 2012.

A joint House-Senate conference committee charged with negotiating a resolution to the sustainable growth rate formula issue, reached a tentative agreement late Wednesday night to delay for 10 months 27.4% in Medicare provider reimbursement cuts scheduled to go into effect on March 1.

Lawmakers finalized on Thursday details of The Middle Class Tax Relief and Job Creation Act of 2012. The timing is critical. Congressional leaders want to vote on the package before Congress adjourns for a one-week recess beginning this weekend.

In addition to delaying the Medicare reimbursement cuts, the legislation extends the payroll tax holiday through to the end of 2012, eliminates the extended unemployment benefits program, and extends certain welfare benefits programs through to the end of the year. The legislative package, which is summarized here, carries an estimated price tag of $150 billion.

According to a summary document from the House Ways and Means Committee, a grab bag of healthcare cuts will be used to offset the delay in the Medicare reimbursement cuts, including:

• $11.6 billion in funding from the Patient Protection and Affordable Care Act, including $5 billion from the prevention fund
• $9.6 billion from Medicare bad debt and clinical laboratory payments
• $4.1 billion from the Medicaid Disproportionate Share Hospital payments
• $2.5 billion in enhanced Medicaid funds earmarked for Louisiana

In addition, the legislation eliminates the Medicare extender programs for mental health add-on payments as well as the increased payments for bone density scans. It also phases out Section 508 hospitals and special pathology payments, and extends the therapy cap exception process through 2012.

The legislation allows for additional oversight of some programs. Ambulance add-on payments and outpatient hospital hold harmless payments will be extended, but the Centers for Medicare & Medicaid Services and the General Accounting Office will be required to report to Congress on the effectiveness of the programs.

Congress has been wringing its collective hands for years over what to do about the sustainable growth rate, which was put in place as part of the Balanced Budget Act of 1997 to help control Medicare spending. It soon became apparent that significant cuts in physician reimbursements would be required to help reduce that spending, but for 10 years Congress has declined to implement the reimbursement reductions. Stakeholders have routinely asked that the SGR be repealed and replaced with a more practical system.

There was some hope in 2011 that the Congressional deficit-reduction super committee would act to repeal the SGR, but that committee failed to take any action. If passed, the latest 10-month extension would mean that a lame-duck Congress and possibly a lame-duck president would have to reconsider the SGR issue again.

It comes as no surprise that physicians and hospitals are unhappy with the proposed legislation. Peter W. Carmel, MD, president of the American Medical Association issued a statement saying the group was "deeply disappointed that Congress chose to just do another patch–kicking the can, growing the problem, and missing a clear opportunity to … permanently replace the flawed Medicare physician payment formula."

Meanwhile Rich Umbdenstock, president and CEO of the American Hospital Association, expressed disappointment that "Congress is putting seniors' access to hospital services in jeopardy through arbitrary reductions to hospitals" He says the proposal adds "an unnecessary strain to hospitals that care for vulnerable populations. It limits therapy services provided in hospitals and assistance that helps defray Medicare and Medicaid costs to low-income seniors.  This is shortsighted and overlooks the critical role hospitals play in supporting a broad range of services to the elderly."