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Details Emerging on Possible Physician Payment Patches

By Emily Ethridge, CQ Roll Call

December 3, 2012 -- Health care stakeholders are urging Congress to prevent scheduled cuts in payments to Medicare physicians, as details on another annual patch are getting caught up in the deficit-reduction negotiations.

Lobbyists and provider groups are meeting with congressional staffers to try to discuss details of how to avert the payment reductions, although aides say details may not be ironed out between the parties until a broader deficit agreement is reached. A payment patch for Medicare physicians, also known as a "doc fix," is likely to be included as part of a larger deal.

With much still unresolved on a deficit-reduction agreement, lawmakers have been mostly quiet on how to avoid the expiring Medicare physician payment rates. But lobbyists say some details are being discussed—particularly the tricky issue of how to offset the cost of a payment patch.

A one-year extension of current payment rates is expected to cost about $25 billion over 10 years, and lawmakers have previously insisted that the cost be offset by other provisions.

In addition, lawmakers are likely to include some other Medicare payment provisions, which could bring the total cost to more than $30 billion, according to a House aide.

Without congressional action, providers who see Medicare patients will have their payments reduced by about 27 percent starting Jan. 1. The cuts are called for in a formula known as the sustainable growth rate, enacted to try to rein in Medicare's spending growth.

Lawmakers have regularly blocked the cuts over the past decade.

This year, it looks like payments to other health providers and hospitals could once again be a source of offsets. The most recent patch (PL 112-96), which stopped scheduled payment cuts for doctors through Dec. 31, was partially paid for by cutting payments to hospitals, skilled nursing facilities and clinical labs.

Hospital groups are concerned that this year's fix will again cap payments for certain services performed in hospital outpatient departments at the lower rate paid to physicians for performing the services in their offices.

"We're very concerned about these cuts," said Erik Rasmussen, senior associate director at the American Hospital Association, at a briefing last week. "We think they're on the final list of what's going to get in."

One health care lobbyist said the payment cap has "gotten a lot of traction" in discussions.

The Medicare Payment Advisory Commission has recommended phasing in reduced payment rates for hospital outpatient department services, and said it could save between $1 billion and $5 billion over five years.

Another potential offset is eliminating a temporary increase in Medicaid payments to primary care providers that is supposed to match higher Medicare rates. The 2010 health care law (PL 111-148, PL 111-152) funds the increase in Medicaid primary care physician payments for two years, starting Jan. 1.

But Democrats are deeply concerned about that potential cut to Medicaid primary care physicians, according to a Democratic aide.

In addition, a health care lobbyist said physician groups would make a coordinated effort to stop the use of the increased primary care payments as an offset.

Another offset seen as "low-hanging fruit" is to reduce payments to hospitals that treat large numbers of uninsured patients and those with Medicaid. Under the health care law, payments to those so-called disproportionate share hospitals are to be reduced by $18 billion between 2014 and 2020. The doc fix earlier this year extended those payment reductions by one year, and it's possible they could be extended again this time around.

Also under discussion as potential offsets are cutting reimbursements for skilled nursing facilities and reducing updated, increased payment rates for other providers and hospitals, according to lobbyists.

A doc fix that would last longer than one year is not likely to be on the table, stakeholders said.

But Sean Neary, communications director for the Senate Finance Committee, said panel Chairman Max Baucus, D-Mont., is working on the issue and wants to find a permanent solution if possible.

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