Disaster Averted, For Now: Congress Cancels Medicare Cut, But Permanent Fix Still Elusive

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Medical Economics Feature - September 2008


Tex Med . 2008;104(9):27-30.

By  Ken Ortolon
Senior Editor

Medicare beneficiaries and their doctors breathed a sigh of relief July 15 when Congress voted to override a presidential veto and reverse a 10.6-percent cut in Medicare physician fees that had taken effect just two weeks before.

The final vote culminated a monthlong debate that saw high drama, with an ailing senator leaving his sickbed to cast a crucial vote, large numbers of Republicans refusing to back President George W. Bush's veto, a rare bipartisan vote in the House of Representatives, a concerted, motivated, and focused grassroots groundswell urging Congress to support the bill, and the Texas Medical Association Political Action Committee ( TEXPAC ) rescinding its endorsement of a longtime friend of medicine.

TMA leaders say replacing the fee cut with a modest increase for the next 18 months was critical to preserving access to care for Medicare beneficiaries, as well as the financial viability of the doctors who care for them.

TMA President Josie R. Williams, MD, says the cut would have had an immediate and disastrous impact on patients' access to care "because of the number of primary care physicians who literally already are having to borrow money to keep their doors open."

Dr. Williams applauded U.S. Sens. John Cornyn (R-Texas) and Kay Bailey Hutchison (R-Texas), along with 23 House members from Texas, who voted to override the president's veto. But she says Congress must use the 18-month reprieve it gave itself to come up with a permanent solution to the flawed Medicare physician payment formula that is driving the fee cuts.

"Texas physicians are standing with our patients - seniors, military families, and patients with disabilities - to ensure that their medical needs are met now and in the future," she said. "This short-term fix is the first step. We call upon leaders on both sides of the aisle to begin bipartisan work. We cannot wait until January 2010 to devise a plan. Now, today, is the time to begin work toward a long-term solution of the Medicare financing fiasco."


Getting Cloture

In what one analyst described as a "stunning rebuke" of President Bush, Congress voted July 15 to override a veto that the president had issued only hours earlier and let HR 6331, the Medicare Improvements for Patients and Providers Act of 2008, become law.

The measure narrowly made it to the Senate floor for a vote just days earlier when Sen. Edward M. Kennedy (D-Mass.), recovering from surgery to remove a brain tumor, returned to Washington, D.C., to dramatically cast the deciding vote to cut off debate on the measure as his colleagues gave him a standing ovation.

Both Senators Cornyn and Hutchison had voted against invoking cloture on June 26. The measure failed by just one vote, and the Senate left town to break for the July 4 weekend. However, both reversed their initial votes and voted for the bill on July 9, after patients and physicians deluged Congress with millions of calls and e-mails urging passage of the measure.

The June 26 vote resulted in TEXPAC withdrawing its endorsement of Senator Cornyn, who is facing reelection this year. Senator Hutchison is not. El Paso surgeon Manuel Acosta, MD, TEXPAC chair, says the decision to rescind the Cornyn endorsement was "very painful," but the senator's vote against the Medicare fix "really struck a nerve" with Texas physicians.

"Senator Cornyn found out that we were really very, very upset," Dr. Acosta said. "In this economic environment, physician practices simply can't sustain a 10.6-percent cut in their Medicare fees without having to dramatically alter their practices."

Dr. Acosta spoke of the decision to revoke the Cornyn endorsement, "This was the straw that broke the camel's back. After visiting, lobbying, and working with our senators for months, if not years, on a solution and finding out that either of them could have been the key vote to move the bill forward before the deadline, we acted immediately. Physicians expect action in dealing with the Medicare payment fiasco, not excuses or political games. The frustration has just boiled over."

President Bush had threatened to veto the bill because it paid for the physician fee increase by cutting funding to private insurers who offer Medicare Advantage plans. The majority of these cuts were dollars earmarked to cover indirect medical education (IME) costs. TMA leaders, however, say that Medicare Advantage plans do not actually use these dollars to pay any IME costs and that the federal government pays IME costs separately to teaching hospitals.

The president made good on his veto threat just days after the bill passed, but it was clear he was destined to lose this fight. The House immediately voted 355 to 59 to override the veto, and the Senate quickly followed suit on a vote of 70 to 26. A total of 153 House Republicans and 21 Republican senators joined the Democrats in overturning the veto.

Following the override vote, Dr. Williams applauded both Senators Cornyn and Hutchison for their courage in listening to patients and physicians. Dr. Acosta anticipates the TEXPAC board will reconsider its action on Senator Cornyn, in light of his support and actions toward reaching a workable solution to the Medicare conundrum, at the TMA Fall Summit.

Dr. Acosta says both senators have a long track record with TEXPAC and medicine over the years. "Just as with family, we disagree on issues. TEXPAC felt that decisive action was needed to communicate our displeasure and the gravity of the situation. TEXPAC recognizes the work that both Senators Cornyn and Hutchison have done on behalf of medicine in the past, and we are committed to working with them moving forward to ensure the best possible care for our patients and their constituents."


A Positive Update

HR 6331 not only reverses the 10.6-percent cut that took effect July 1 but also cancels an additional 5.4-percent cut slated to take effect Jan. 1, 2009. Instead of the cuts, Congress extended a 0.5-percent increase enacted in January through the end of 2008. And, physicians will see a 1.1-percent increase for 2009.

Other provisions of the bill should also be good news for physicians. The measure extends the geographic practice cost index work floor through 2009. Fees for physicians in rural Texas and San Antonio would have been cut had the floor not been extended.

Also, the bill:

  • Extends Medicare's Physician Quality Reporting Initiative for two years and provides a 2-percent bonus payment for reporting;
  • Adds new funding and expanded authority for the Medical Home Demonstration Project;
  • Increases pay for certain mental health services by 5 percent;
  • Gives teaching anesthesiologists a 100-percent payment for two concurrent cases starting in 2010;
  • Expands coverage for Medicare preventive services, including the "Welcome to Medicare" visit;
  • Provides a 2-percent bonus for e-prescribing in 2009 and 2010;
  • Delays a durable medical equipment (DME) competitive bidding program for 18 months and allows the Department of Health and Human Services to permanently exempt physician suppliers from DME accreditation; and
  • Phases out the ability of certain Medicare Advantage private fee-for-service (PFFS) plans (those in urban markets with at least one other Medicare Advantage plan) to sign up Medicare beneficiaries without actually developing a provider network. PFFS plans currently may "deem" the physician or other provider as being in their network based on the physician's continuing treatment of patients with PFFS plan coverage.

There also are a few provisions that physicians may not like. The e-prescribing bonus is reduced from 2 percent to 1 percent for 2011 and 2012, then to 0.5 percent in 2013. Beginning in 2012, physicians who do not use e-prescribing will be subject to a 1-percent penalty. That increases to 1.5 percent in 2013 and 2 percent in 2014.

Also, physicians who furnish imaging services in their offices, including MRIs, CT scans, and other services, will have to meet Medicare accreditation standards beginning in 2012.


Looking for Back Pay

Although the 10.6-percent cut technically was in effect for the first two weeks of July, the actual impact on Texas physicians is unclear. The U.S. Centers for Medicare & Medicaid Services (CMS) requires its contractors to hold electronic claims for 14 days and paper claims for 30 days before issuing payment.

And, President Bush instructed CMS to have its contractors delay processing of claims filed in early July as long as possible to give Congress time to act on the cuts.

Teresa Devine, director of TMA's Payment Advocacy Department, says she also talked with a number of physician practices that were holding off filing their July claims until the issue was resolved.

Even if some claims were processed and paid at the lower rate before July 15, CMS says it will make up the difference. The agency said in late July it would reprocess any claims paid at the lower rates as soon as the new fee schedule is in place. An impact is likely to be felt because physician practices were given no direction regarding copayments or patient financial responsibilities after the cut temporarily went into effect. The bottom line, Ms. Devine says, is that Congress fails to recognize the ripple impact congressional inaction has on physician practices far beyond its own piece of Medicare payment. Just as often occurs after a bad storm in Texas, these practices will likely be cleaning up the mess for months to come.


Scrapping the SGR

Despite physicians' glee that a 10.6-percent cut in Medicare fees was avoided, Dr. Williams says the 18-month fix merely "kicked the can further down the road." She is hopeful that the stage may finally be set for a permanent solution to the fee issue.

"I would like to hope that they [Congress] have begun to understand the importance of this issue and the depth of frustration physicians face trying to run a medical practice in today's economic times," Dr. Williams said. "I would hope they will make a sincere bipartisan effort to get a bill to fix this problem instead of just kicking the can down the road again."

U.S. Rep. Michael Burgess, MD (R-Flower Mound), has legislation that would scrap the Sustainable Growth Rate (SGR) formula that forces physician payments down to make up for the rising cost of services. Dr. Williams says SGR is unrealistic in an era in which doctors provide more services in their offices than in hospitals.

Representative Burgess' bill would scrap the SGR and tie physician fees to the Medicare Economic Index, which some see as a more accurate measure of the true cost of providing physician services to Medicare beneficiaries.

A number of members of Congress have signed on as cosponsors of the Burgess bill, including U.S. Rep. Lamar Smith (R-Texas), who met with Dr. Williams shortly after the vote to override the president's veto. Representative Smith says it is vitally important to Medicare patients that Congress fix the physician payment formula and stop the cuts once and for all.

"These cuts force doctors who see Medicare patients to pay increasingly more out of pocket, putting them in the unfortunate position of either turning away Medicare patients or going out of business," Representative Smith said. "A permanent fix is sorely needed."

Senator Cornyn, who says HR 6331 merely put a Band-Aid on a broken Medicare system, also has filed legislation similar to Congressman Burgess' bill that would scrap the SGR. But so far, neither bill has gained much traction in Congress. And political observers say a permanent fee fix is not likely to move forward without a truly bipartisan effort.

Dr. Williams says the outlook for that is not good in the highly charged atmosphere of a presidential election campaign. She does not expect any action on a permanent fix until a new president and a new Congress take office in 2009.

Meanwhile, access to care for Medicare patients will continue to be threatened. Over the past nine years, the percentage of Texas physicians willing to see new Medicare patients has declined by 20 percent. That, Dr. Williams says, is unprecedented.

"Those numbers will go lower and lower unless this is fixed," she said.

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by e-mail at  Ken Ortolon .


Contributions to Texas Medical Association Political Action Committee (TEXPAC), Texas Medical Association PAC-Statewide (TEXPAC-Statewide), and American Medical Association PAC (AMPAC) are not deductible as charitable contributions for federal income tax purposes.

Voluntary political contributions to TEXPAC are shared with AMPAC. Contributions are not limited to any suggested amount. Neither TMA nor AMA will favor or disadvantage anyone based on the amounts or failure to make contributions. Contributions to TEXPAC and AMPAC are subject to Federal Election Commission regulations. Federal election law prohibits TMA from soliciting donations from persons who are not in its solicitable class (e.g., TMA members and their families). All donations received from persons who are not in TMA's solicitable class will be returned.


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