Senate Reaches 1-Year Deal to Block 25% Cut to Doctors' Medicare Payments

U.S. physicians would get a one-year reprieve from a 25 percent cut in the fees they receive from Medicare under an agreement announced by senators.

Democratic and Republican leaders in the Senate agreed to a $19.2 billion bill that would replace next year’s scheduled reduction in Medicare payments by freezing the rates, Senate Majority Leader Harry Reid, a Nevada Democrat, and Senator Mitch McConnell, the Republican leader from Kentucky, said today in a statement.

Passage by the Senate and House before Congress adjourns for the Christmas holidays would give lawmakers a year to devise a permanent replacement for the formula that calculates how much doctors get paid by Medicare, the U.S. government health program for the elderly and disabled. Every year since 2002, physicians have faced cuts that were eventually stopped by Congress.

“We put together a longer-term solution to provide the certainty doctors need and the security patients deserve,” Senator Max Baucus, a Democrat of Montana and chairman of the Finance Committee, said in a statement. Reid, McConnell, Baucus and Senator Charles Grassley of Iowa, the senior Republican on the Finance Committee, jointly introduced the legislation.

The new spending required by the legislation would be paid for by making changes to the health overhaul President Barack Obama signed in March.

Tax Credits

The law establishes tax credits in 2014 for health insurance purchases by low and middle-income individuals and families. Under the statute, people are required to repay the federal government if they receive a larger credit than they should have, such as if their incomes rise during a year. The statute caps that amount at $250 for an individual and $400 for a family.

The legislation announced today would require people with higher incomes to give back more of what they received. A summary released by the senators didn’t specify how much the repayments would increase for individuals and families. The provision would raise $19 billion over 10 years and the rest of the money would come from savings in other areas of the Medicare program, according to a summary of the bill released by the Finance Committee.

Cost Controls

Medicare has cost-control formulas designed to reduce total spending on physician services from year to year by linking rates to overall economic growth. The scheduled fee cuts have climbed to the proposed 25 percent in 2011 from the original 4.8 percent reduction planned in 2002. Payments for physician and clinical services will account for 13 percent of the program’s $509 billion in expenditures this year, according to an analysis of U.S. government data by the nonprofit Kaiser Family Foundation, based in Menlo Park, California.

Medicare now covers about 46.6 million Americans, according to the foundation.

Obama supports postponing the physician fee cut until 2012 and enacting a new method of setting rates, Health and Human Services Secretary Kathleen Sebelius said last month.

The American Medical Association, the largest U.S. physicians’ organization, is among the groups that want Congress to create an alternative formula to replace the current system.

To contact the reporter on this story: Jeffrey Young in Washington at jyoung89@bloomberg.net.

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.