HOUSE|SENATE

111th congress, vote #909; House of Representatives #3961

Revising Physician Fee Schedules, Reinstatement of PAYGO

Official Title: An Act to extend expiring provisions of the USA PATRIOT Improvement and Reauthorization Act of 2005 and Intelligence Reform and Terrorism Prevention Act of 2004 until February 28, 2011.

HR 3961 Revising Medicare Physician Fee Schedules, Reinstatement of PAYGO
Passed by House Nov. 19, 2009
Not acted upon in Senate

Synopsis: This bill, supported by many Democrats, senior groups and physician organizations, would have changed the way physicians are paid under Medicare by adjusting the formula that Congress is supposed to use when updating annual payments to physicians.

The Balanced Budget Act of 1997 created the "Sustainable Growth Rate" (SGR), a formula designed to make sure that total spending on Medicare physicians' services didn't grow too fast. The SGR is based on a number of factors, including changes in physicians costs (such as rent, staff and supplies), changes in the number of Medicare fee-for-service beneficiaries, and the rate of growth in the per capita gross domestic product, calculated as a 10-year moving average. If Medicare's payments to physicians exceeded the SGR target, the update for a future year would be cut in order to bring spending back in line with the SGR.

During the first few years, the formula appeared to be working. From 1997 through 2000, GDP grew by more than 4 percent a year – faster than Medicare payments to physicians. But beginning in 2000, economic growth slowed, and as a result Medicare's outlays to physicians grew faster than GDP. This meant that in 2002, the formula called for cutting fees for physicians' services by 4.8 percent, and Congress did just that.

Physicians protested – as did seniors who feared they were going to lose their doctors. Congress listened, and in the years that followed, legislators refrained from slicing physicians' fees, even though GDP growth remained sluggish.

Year after year the SGR continued to call for cuts rather than increases. But each year Congress simply kicked the can down the road, voting to postpone the cuts, hoping that in the future, the economy would pick up, the SGR would call for raising physician's fees, and over time, things would work out.

This didn't happen. Instead, the postponed cuts continued to pile up, until by 2011, the formula called for slashing payments to physicians by 21 percent. If this happened, observers warned, many physicians might well stop taking Medicare patients.

HR 3961 was designed to create a new base for the Sustainable Growth Rate for 2011 and later years, by making what Medicare actually spent on physicians' services in 2009 the new benchmark. The Senate refused to consider the bill and so in December 2010 Congress approved another temporary "doc fix" that once again postponed the SGR cut that has been looming for years. Many observers believe that legislators will never let such a large across-the board cut take effect.

Under the health care reform signed in 2010, the Secretary of Health and Human services now has the power to lower payments for services that are "overvalued" while lifting reimbursements for services that are "undervalued." This approach is favored by those who believe that changes should be made with a scalpel, not an axe.

Why supporters pushed for this bill