Ken's Project Blog

January 1, 2011

Medicare Reimbursement Cuts Postponed (again)

Filed under: Uncategorized — Ken @ 10:09 am

As I clean out my laptop bag and prepare for the new year, I came across a few articles from my recent trip to Walt Disney Worlds in Florida that I wanted to get to, but didn’t have time to then. This is one of those stories.

As they did last December, and last March, and again last month, Congress has decided to kick the can out a little further and delay proposed cuts to Medicare reimbursements until January, 2011 (now!).

What are these cuts that Congress proposed, but seems deathly afraid of actually imposing?

The payment cuts are the result of a 1990s budget-balancing law that attempted, with little success, to keep Medicare spending in line. With medical groups estimating that as many as two-thirds of doctors would stop taking new Medicare patients if the cuts go into effect, Congress has had to periodically step in to stop the automatic cuts.


First, it is important to note – this has nothing to do with the recently enacted Health Care Reform (so-called “Obamacare”), this is part of legislation passed under President Clinton to balance the budget (and presumably contributed to the “proposed budget surplus” the left keeps carping Clinton left Bush).

So how big are the cuts, well it appears they are between 23-25%, and are significant enough that many doctors are expected to stop accepting Medicare patients as in some cases the reimbursement rates don’t even cover the costs of delivering the services being paid for (doctors would lose money on every patient, and you can’t make that up in volume!). This is not idle speculation on my part, this is a widely held belief:

“This bill is a stopgap measure to make sure that seniors and military families can continue to see their doctors during December while we work on the solution for the next year,” said Rep. Frank Pallone, D-N.J., chairman of the Energy and Commerce health subcommittee.

Health care payment formulas for military service members and veterans are tied to Medicare.

President Barack Obama is urging Congress “to now pass a one-year extension to ensure seniors maintain access to the doctor they know and trust over the coming year,” the White House said in a statement. Source:

These cuts will impact 46 Million Americans.

The cuts stem from 1997 legislation aimed at reducing the cost of Medicare coverage, and the cuts have been a serious bone of contention between Doctors and the Government for several years – every time the proposed cuts are delayed, the required cuts grow creating an ever-greater incentive to defer the cuts further for short-term political gain.

The SGR formula, adopted in the Balanced Budget Act of 1997, has not lived up to its founding premise – controlling healthcare costs. Instead, it has thrown doctors in a quandary, said Lori Heim, MD, president of the American Academy of Family Physicians.

“Every year that the cost to the government exceeds what is predicted by the formula, then that amount in the subsequent year is supposed to be deducted from the payment to all physicians,” said Heim, who practices in North Carolina. Source:

It was reported that last summer, when Congress missed the deadline for an extension, Medicare officials had to hold off processing claims to avoid paying the lower rates.

“The Medicare pay cut is the ‘Sword of Damocles,’ constantly hanging over our heads,” said Craig Czarsty, MD, a Connecticut physician who is chair-elect of the American Board of Family Medicine.

Amid the ongoing threat of cuts, Czarsty has pondered what he would do if it becomes reality. He probably will stop taking new Medicare patients, and he predicts that many other physicians will respond likewise.
“Those who work for larger groups or hospital systems may be insulated for a while, but ultimately, it will affect them, too,” Czarsty said.

Keep this story in mind when politicians want to pay for current benefits with future cuts – ask yourself will those politicians have the guts to implement the cuts their predecessors promised, or not? Like the $12 Billion in cuts to Food Stamps proposed last August to fund $26 Billion in aid for teachers, policemen, firefighters, EMTs and other first responders and shore-up the Medicare system for a few months. Even as they passed the bill requiring future cuts to Food Stamps, supporters of the bill vowed to work hard to find alternative cuts to save Food Stamp funding levels… Well, we’ve spent the money, but no alternatives have been found – any chance politicians will not simply “kick the can” again and defer the cuts by promising other cuts down the road?


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