Medicare Payment Cuts to be Implemented Despite Senate Action

June 18, 2010— -- Doctors who treat Medicare patients will be subject to a 21.3 percent cut in their payments -- at least for now -- despite a last-minute effort by the Senate to delay the cuts.

The Senate today passed a six-month extension of the so-called Medicare "doc fix" after Democrats agreed to a Republican requirement that the extension not add to the deficit. The Senate's late action only gets the bill a third of the way into law. The measure has to be voted on by the House of Representatives and then signed by President Obama, and until then, the Centers for Medicare and Medicaid have to pay doctors the reduced rates.

"We have to pay under the current law and the current law is the -21.3 percent," a spokesperson for CMS told ABCNews.com. Until both the Senate and the House pass "the bill and the president signs it, the changes are not effective. So we can't pay under that until the bill becomes law and there is no change in what we are paying."

Just before the Senate voted today, the CMS directed its providers to start implementing the pay cut for claims on June 1 and later.

Discussions in Congress on the payment cuts were stalled because of concerns about its impact on the budget deficit. On Thursday, Senate Democrats failed for the second time in a week to get the 60 votes they needed to revive the "doc fix."

The Senate's more than $6 billion measure, passed today, would be paid for by limiting how much some companies have to obligate to pension funds, raising more than $2 billion because those companies would pay taxes on the money not placed in the pension funds. The pension measure is worth $4 billion to the government. Another cost-offset would limit when Medicare can adjust claims made by hospitals for inpatients. This would save the government more than $4 billion.

A statement issued late Friday afternoon from House Speaker Nancy Pelosi indicated the bill might not have an easy a road through the House of Representatives.

"Weeks ago, the House passed legislation to ensure that doctors don't drop Medicare patients. Now that the Senate has acted today on a six-month extension, we will review their legislation as we remain committed to ensuring that our seniors and veterans receive the care they deserve," said Nadeam Elshami, a spokesman for House Speaker Nancy Pelosi.

While House Democrats are not promising to immediately pass what the Senate did – making it more likely that some doctors will be paid at the lower rate for some period of time, they also predict that whatever final bill is sent to the President will be retroactive.

Meanwhile, doctors unanimously expressed outrage at the Medicare payment cuts.

"Congress has broken its promise to America's seniors and military families," Cecil B. Wilson, president of the American Medical Association, said in a statement Thursday. "Continued short-term actions are creating severe instability that harms seniors as physicians make decisions to protect their practices from Medicare's volatility. Continuing down this path just slaps a Band-Aid on a problem that needs urgent surgery."

For Isabel V. Hoverman, an internist in Austin, Texas, the payment cuts mean a significant decrease in income. About 30 percent of patients in Hoverman's clinic utilize Medicare benefits, and she said a "large percentage" of her income comes from them. Hoverman said she already is turning away new Medicare patients because of the cost issue.

Because of the payment cuts, Hoverman told ABC News, doctors "will not be able to recoup the difference as it will be too costly for us to go back and rebill the difference to patients... We will have no option but to start asking our Medicare patients to find a new primary care physician, which already is extremely difficult for patients to find."

Senate Minority Leader Mitch McConnell, R-Kentucky, today hailed the passage of the measure as a "good example of bipartisanship" and "something both sides can feel good about," but doctors say they are unfairly caught in the middle of political wrangling between parties. Many blame both Republicans and Democrats for inaction.

"A lot of promises were made when Republicans controlled the three legislative branches, and nothing was done. Now with the Democrats the SGR is still an issue but they found the money for health care 'reform,'" said Randy Wexler, assistant professor of clinical family medicine at The Ohio State University. "Physicians feel that the only ones left without a chair when the music stopped was us."

While applauding the vote, Senate Majority Leader Harry Reid, D-Nevada, today acknowledged the delays in the Senate and the frustration caused by them.

"Sometimes the Senate can be terribly disconcerting, aggravating, but that's the way the Senate is," he said. "I love the Senate. And every day that goes by, I understand for the times I'm aggravated and disconcerted, there are many -- the vast majority of the time I'm amazed at how we're able to get things done."

More than 43 million Americans over the age of 65 are on Medicare, one of the federal government's largest expenditures after defense and Social Security. Medicare accounts for about 13 percent of federal spending and 22 percent of national health expenditures.

The cuts in reimbursement stem from a payment formula based on the sustainable growth rate, or SGR, a program Congress set up in 1997 that tied the payments doctors received for treating these patients to the nation's gross domestic product. But even though the cuts were scheduled to take effect at the turn of the millennium, a series of quick fixes have pushed the schedule back.

Congress has instituted such delays nine times over the past eight years, most recently last April.

When it was implemented, the formula was well intentioned, said Stuart Guterman, assistant vice president at The Commonwealth Fund, an independent research organization. But since then it has misfired, because it doesn't focus on the reasons behind the rise in spending and specific services that are overpriced.

Doctors to See Cuts in Medicare Payments

It's that formula that needs to be fixed to make the program sustainable, medical professionals concur, rather than simply imposing temporary fixes to override the payment cuts without addressing the root causes of the growth in expenditures.

"We're left with a choice between a temporary fix that just 'kicks the can down the road' without fixing the underlying problem and a 21 percent across-the-board cut in physician fees that would cut primary care as well as specialty care, distort incentives, hurt beneficiaries, and severely damage the credibility of the Medicare program," Guterman told ABC News. "The recurring cuts in physician fees produced by the SGR formula must be eliminated in order to achieve effective payment and delivery system reforms."

But many lawmakers are concerned about the costs associated with such a fix. The Congressional Budget Office estimates that over the next two years, such a fix would tack an additional $22 billion to the federal deficit.

The inaction in Senate stemmed from the hesitation of some Democrats to support provisions in the larger bill -- that includes the Medicare "doc fix" -- that they say will add to the burgeoning budget deficit and the national debt.

Republicans put a proposal on the table that called for using money from the stimulus bill to offset the cost of the expiring provisions, but it was rejected by Democrats.

Some doctors say the delays in implementing a fix for Medicare payments and coming together on an agreement is an ominous sign for the massive health care bill that has to be rolled out in the next four years.

"I don't fear the rate cut. I fear the consequences of the refusal to make a decision. If this is happening now just imagine what is going to happen when health care reform in implemented," said Neil Brooks, president-elect of the American Academy of Family Physicians.

ABC News' Z. Byron Wolf contributed to this report.