Medicare Physician Pay Cut Further Delayed

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In what is becoming a bimonthly exercise, Congress on November 29, 2010, passed legislation delaying until December 31, 2010, a 23% Medicare physician payment cut that was scheduled to take effect December 1, 2010. Had this Congressional Band-Aid not been applied, the 23% physician payment cuts would have started this week. President Obama is expected to sign the legislation.

Under current law, if no further action had been taken, the Medicare Physician Fee Schedule ("MPFS") on December 1, would be reduced by an average of 23% due to the impact of the sustainable growth rate formula ("SGR"). Under the SGR, cumulative Medicare spending for physician services is supposed to follow a target path equal to the rate of growth in physician costs, Medicare enrollment, and growth in real gross domestic product. Spending in excess ofthe SGR target in a given year results in automatic reductions inspending for physician services the following year. However, Congress has chosen to "defer" the SGR impact virtually each year since inception. Thus, cumulative deferred reductions amount to about a 23% cut.

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