CMS: Stop Us Before We Do Something Stupid

Medicare says it will lower payments to physicians by 29.5 percent at the end of the year, a cut so drastic that even the man in charge says it must be stopped.

"This payment cut would have serious consequences, and we cannot and will not allow it to happen," said Centers for Medicare & Medicaid Services (CMS) Administrator Donald Berwick, MD. "We need a permanent SGR [Sustainable Growth Rate] fix to solve this problem once and for all. That's why the president's budget and his fiscal framework call for averting these cuts and why we are determined to pass and implement a permanent and sustainable fix."

Medicare payments are based on the SGR formula, established by the Balanced Budget Act of 1997. The fee reduction will take effect Jan. 1 unless Congress acts, either by replacing the SGR with a fair payment system, or, as it has done in for the last decade, passing last-minute legislation to stop the SGR-mandated cuts and institute small increases.

In March, the Texas Medical Association joined the American Medical Association and several other state medical societies to urge Congress to "begin working in a bipartisan, bicameral manner" to eliminate the SGR "and lay the groundwork for adoption of broader physician payment and delivery reforms."

"Last year, Congress was required to act five times to pass short-term measures (for as short as one month) to stop Medicare physician payment cuts scheduled for 2010," the groups said in a letter to Congress. "On three occasions Congress failed to act before cuts were implemented, causing disruptions in processing Medicare payments. These payment uncertainties and delays created serious problems for many physician practices and jeopardized seniors' access to care."

Ultimately, the letter said, "Congress and the Administration worked together in a bipartisan manner" to stop the planned fee cuts and stabilize Medicare physician payments through 2011. "It is our hope that Congress can again work together this year to end the cycle of temporary patches once and for all and develop a long-term and meaningful solution to this issue."

Earlier this month, AMA said its supports legislation to repeal the Independent Payment Advisory Board (IPAB) created by the health system reform bill to reduce Medicare spending. AMA says the IPAB would make physicians subject to double jeopardy under both the IPAB and the SGR.

The latest CMS fee proposal [PDF] updates several physician incentive programs, including the Physician Quality Reporting System, the e-Prescribing Incentive Program, and the Electronic Health Records Incentive Program. It also includes proposed quality and cost measures to establish a new value-based modifier that would reward physicians for providing higher quality and more efficient care.

What's at Stake

The Congressional Budget Office (CBO) published a report summarizing the impact and budgetary costs of various SGR fixes.

According to its analysis, the 10-year budgetary cost of a corrected fee schedule update formula that allows small annual increases to partially offset increasing physician practice operating costs now exceeds $350 billion, and the more Congress postpones the problem, the larger the price will be. Nonetheless, Congress may opt for another temporary patch, and the CBO report describes the options:

  • "Clawback" options temporarily over-ride the SGR cuts, then allow fees to gradually fall back to the target level, with no single-year cut exceeding 7 percent.
  • "Cliff" options also apply a temporary fix, but allow the fees to fall back to target levels immediately after the temporary period expires.

The report details various possibilities for both types of congressional action and for various types of permanent SGR revisions and replacements. Some examples include:


Percent Increase   Type   Effective Period   Cuts After Effective Period   5-Year Cost (Billions)  

10-Year Cost

1%   Cliff   2012-14   -43% in 2015   $59.1   $39.4
1%   Clawback   2012-14   Limited annual   $106.9   $200.4
1%   Permanent   Through 2021   N/A   $117.8   $342.1



A quick look at the numbers shows why Congress has been using the "cliff" option in recent years and why permanent changes are difficult.

CMS will accept comments on the proposed rule until Aug. 30 and plans to issue a final rule by Nov. 1. Comments can be submitted electronically at or by mail to CMS, Department of Health and Human Services, Attention: CMS-1524-P, PO Box 8013, Baltimore, MD 21244-8013.

Visit TMA's Medicare Meltdown Action Centerfor more information about TMA's Medicare advocacy efforts for physicians and patients.

Action, July 19, 2011

Last Updated On

August 21, 2015

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