Recent Budget Pact Leaves Physicians Pondering Impact on Medicare Fees

The last-minute budget deal brokered by Congress earlier this month makes for a lot of uncertainty about the scope of federal spending for years to come on programs important to psychiatry and the rest of medicine (see Key Points of Budget Act for Physicians).

But in the meantime, the deal does nothing to avert the scheduled across-the-board reduction in Medicare payment of more than 30 percent due in 2012. And, the current 5 percent positive payment "bump" for psychiatric CPTs is still scheduled to expire on December 31 (Psychiatric News, January 7).

But APA Director of Government Relations Nicholas Meyers said the legislative process created by the deal for determining federal spending in years to come could make it easier to achieve something physicians have long sought: reform of the sustainable growth rate (SGR) formula for payment of physicians in the Medicare program.

The Budget Control Act of 2011, forged just days before the August 2 deadline for raising the nation's debt ceiling, establishes caps for discretionary spending from Fiscal 2012 to Fiscal 2021. For 2012 and 2013, the caps are set at $1.043 trillion and $1.047 trillion, respectively.

Exactly how those spending caps will play out for any number of medicine- and health-related federal spending programs remains to be seen. In a memorandum to the APA Board of Trustees on August 2, Meyers noted that "details about specific spending cuts impacting psychiatrists, other physicians, health professionals, and institutional providers are speculative, in large measure because the agreement relies on a 12-member congressional panel to specify how programs will be cut."

That new panel established by the budget deal will be the Joint Select Committee on Deficit Reduction and will consist of six members (three Democrats and three Republicans) from both the House and the Senate.

"Regular" standing committees of Congress will be required to recommend total savings and/or possible revenues of $1.5 trillion by October 15, and the Joint Select Committee on Deficit Reduction must in turn vote on a package of savings/revenues by November 23 and report out a bill to the House and Senate by December 2.

If the Joint Select Committee fails to act, or if Congress or the president fails to approve what the committee recommends, then "automatic sequestration"—mandatory cuts—will go into effect that must achieve $1.2 trillion in savings from defense and nondefense funding over 10 years.

Importantly, the Social Security program, Medicare, Medicaid, and unemployment insurance would be exempt from sequestration. But not exempted is Medicare payment for physicians, other health professionals, and institutional providers.

In the event of sequestration, cuts in physician payment would be capped at 2 percent, but Meyers noted that the cap is effective on January 2, 2013—a year after the pending 30 percent reduction in Medicare's payment update occurs if Congress fails to block it, and a day after an additional estimated 2 percent cut takes place for 2013.

Additionally, the bill does not state whether graduate medical education funding is or is not exempt from sequestration; student loan funding, and interest deductibility could be at risk, said Meyers.

As for reform or repeal of Medicare's SGR formula, the budget deal is silent. But Meyers said the agreement creates a legislative process whereby SGR reform might be one component of a massive bill to restructure federal spending. Such a bill approved by the Joint Select Committee would not be subject to rules requiring a 60-vote approval in the Senate and could have an easier path to passage than it would as a stand-alone bill subject to standard congressional rules.

But SGR reform will not be without cost. "It is clear that securing passage of a fix for the SGR will not be pain-free, since some sort of offsets will have to be found," Meyers told APA Board members. "There is simply no way that all physician priorities—fixing SGR, protecting graduate medical education—can be accommodated in the new budget reality."

He noted that even a one-year postponement of the Medicare payment cuts mandated by the current formula will cost $22 billion, while repeal of the formula would cost roughly $300 billion over 10 years.

The text of the Budget Control Act of 2011 is posted at <www.rules.house.gov/Media/file/PDF_112_1/Floor_Text/DEBT_016_xml.pdf>.