If It’s Broken, Fix It (At Least Temporarily): New “Doc Fix” Law Prevents Automatic Medicare Pay Cuts to Physicians

by Obermayer Rebmann Maxwell & Hippel LLP
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Were you worried that your physician pay rate would plummet come March 31 due to Medicare’s sustainable growth rate (“SGR”) formula? You can stop pulling out your hair, at least until next year. On April 1, 2014, President Obama signed into law a bill that stops automatic Medicare payment cuts due to SGR from taking effect for another year. The law, referred to as the “Doc Fix”, addresses shortfalls in payments that occur due to the way the SGR is calculated, as well as addressing a number of other issues in health care. This newest Doc Fix is the seventeenth such temporary relief that has become law in the past 11 years, as every time automatic cuts are supposed to kick in, Congress intercedes.

For those of you scratching your head instead of pulling out your hair, you are probably wondering what SGR is and why it is still used if it consistently creates shortfalls in physician payments. SGR is a formula used by the Centers for Medicare and Medicaid Services (“CMS”) to set reimbursement rates for Medicare services in the upcoming year with the aim of controlling costs. The basic premise is Medicare expenditures should not exceed gross domestic product (“GDP”) growth, a measure that is used as a proxy for gauging the health of the economy. Based on projections of GDP, the SGR is used to set rates, which results in the reduction of repayments to physicians—had the Doc Fix not been enacted this year, physicians were facing up to a 24% reduction in payments from Medicare. As mentioned above, the idea of the Doc Fix is nothing new and has been used repeatedly by Congress to stave off automatic payment cuts.

So why do we still use SGR? As Senate Majority Leader Harry Reid has stated, Congress just does not “have the votes right now to fix this problem for good.” This is due largely to the price tag associated with replacing the SGR system and moving to something new—estimated to cost around $140 billion dollars—and also because there is no consensus on what should replace SGR. So for now, the status quo, passing a new fix every time this problem arises, is more economical than starting from scratch.

What else does the Doc Fix law address?

  • ICD-10 implementation has been delayed until 2015. ICD-10, short for the “International Classification of Diseases 10th Edition”, is a set of new diagnostic codes that all providers subject to the Health Insurance Portability and Accountability Act (“HIPAA”) would have been required to use beginning October 2014.
  • The Doc Fix delays Medicaid cuts to hospitals serving low income patients that were supposed to take effect.
  • The Doc Fix changes how and what clinical labs will report to CMS—scaling back a previous iteration of this cost saving measure.
  • The Doc Fix eliminates an Affordable Care Act deductible cap in the health plans of small businesses.

The Health Law Gurus™ will continue to follow issues involving SGR.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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