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Full Repeal of 'Doc Fix' Formula May Be Part of Long-Term Plan

By Emily Ethridge, CQ Roll Call

December 18, 2012 – President Barack Obama's latest offer in the fiscal cliff negotiations includes a path to permanently repeal the formula that dictates cuts to Medicare payments to physicians, but that change—as well as others to the federal health care program—probably will wait until next year.

Until then, according to a House aide, Obama would provide physicians with a one-year payment patch to stave off the 27 percent cuts that are scheduled to take effect Jan. 1.

In addition, other major changes to Medicare, including a move to increase the program's eligibility age, also probably will not be considered until next year, when lawmakers take a broader look at entitlement programs, House Speaker John A. Boehner recently said.
At a press conference, he said he would not insist on raising the Medicare eligibility age from 65 to 67 during fiscal cliff negotiations before the end of the year.

"That issue has been on the table, off the table, back on the table. It's an issue for discussion. But I don't believe it's an issue that has to be dealt with between now and the end of the year," said Boehner, R-Ohio. "It is an issue, I think, if Congress were to do entitlement reform next year and tax reform, as we envision, if there's an agreement that issue will certainly be open to debate in that context."

That suggests that whatever deal Obama and Boehner come up with to avert the fiscal cliff will not include significant structural changes to the 47-year-old health care program for seniors and the disabled. In fact, even the details of the $400 billion in cuts to health care entitlement programs—floated as part of Obama's recent proposal—aren't expected to be worked out until early next year."

"The figure given was without specifics and obviously we're going to have to talk specifics at one point or another," Rep. Sander M. Levin, D-Mich., said last week. "I think the 400 billion in health care was proposed to be worked on next year."

Lawmakers and health provider groups have long lobbied to repeal and replace the sustainable growth rate (SGR), a 1997 formula that sets up how much physicians are paid to see Medicare beneficiaries. Lawmakers have consistently prevented the payment cuts from taking place for the past decade, but providers say the uncertainty can lead them to drop Medicare patients.

As with other major changes to the entitlement programs, however, the SGR replacement now is not expected to come up until talks next year.

The House aide said the permanent repeal of the SGR would be discussed next year as lawmakers negotiate other savings to entitlement programs.

Another source familiar with the talks said Obama's offer, made last week, included a permanent repeal of the SGR, in addition to the $400 billion in savings to entitlement programs.

According to a health care lobbyist, House Republicans plan to offer a two-year payment patch in coming days. The proposal would be offset by removing limits on reclaiming overpayments of subsidies for the insurance exchanges in the 2010 health care overhaul (PL 111-148, PL 111-152). A similar offset was used in the 2010 "doc fix," but Democrats have opposed such proposals more recently.

The major hurdle to a permanent repeal of the SGR, whenever it would happen, is the cost. The Congressional Budget Office found that keeping physicians' payment rates steady through 2022 would increase Medicare spending by $245 billion over the next 10 years. A one-year fix to keep payment rates steady is estimated to cost about $25 billion, and lawmakers in the past have demanded that cost be offset.
Senate Finance Committee Chairman Max Baucus, D-Mont., recently expressed enthusiasm for Obama's proposal to include a permanent solution to the SGR, along with one for the alternative minimum tax.

"I love it," he said. "I hope we can pass it."

But when asked how such permanent fixes could be paid for, Baucus replied, "We'll see."

Obama has said he wants a permanent solution to the physician payment formula, but he has not previously proposed a full replacement for it. His fiscal 2012 budget proposal included a two-year payment patch to stop pending cuts, but his fiscal 2013 plan did not offer a way to stop the scheduled reductions.

Obama's fiscal 2012 budget proposal also assumed that any patches to avoid the called-for cuts beyond those two years would be fully offset, but did not specify how. Because the plan did not provide details, the CBO did not include any of those savings in its score of the president's proposal.

If a fiscal cliff deal is not reached, it's unclear whether physicians would get a payment patch. In discussing his so-called Plan B legislation to deal with impending tax increases while negotiations continue, Boehner did not mention a patch to avoid the scheduled cuts.

Rep. Phil Gingrey, R-Ga., said he mentioned the expiring Medicare physician payment patch in a House Republican caucus conference last week.

"I felt very strongly that there should be a doc fix in it. And the speaker did not say one way or another whether there would be a doc fix in it," Gingrey said.

He added that his impression from Boehner was that the Senate might add a proposal to block the Medicare physician payment cuts when it returned the legislation addressing the tax increases.

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