Healthcare cuts proposed to pay for two-year Medicare fix

President Obama's 2012 budget proposal delays a steep cut in Medicare reimbursement rates for doctors by squeezing healthcare payments for a broad cross-section of medical providers, administration officials said.

The budget proposal would postpone for two years a scheduled 25 percent cut in the Medicare physician payment formula, known as the Sustainable Growth Rate (SGR), that's set to go into effect at the end of the year. The $62 billion "doc fix" would be paid for by "changes that squeeze Medicare and Medicaid payments to hospitals and doctors and expand the use of generic drugs in federal health programs," according to The New York Times.

Physicians' groups are lobbying for a permanent repeal of the SGR, and it's not clear how they'll respond to a two-year solution. In any event, the proposed offsets are almost certain to attract considerable criticism when the administration releases additional details on Monday.

Indeed, the proposed "squeeze" comes at a time when hospitals and doctors' groups are already clamoring for Congress to repeal the healthcare reform law's payment advisory board, which is tasked with recommending future cuts to Medicare payments. And Medicare's chief actuary, Rick Foster, has testified several times that cuts already required by the law may be unsustainable.



"It is important to note that the estimated savings for one category of Medicare provisions may be unrealistic," Foster testified before the House Budget Committee last month. "The Affordable Care Act requires permanent annual productivity adjustments to price updates for most providers...While such payment update reductions will create a strong incentive for providers to maximize efficiency, it is doubtful that many will be able to improve their own productivity to the degree achieved by the economy at large."


The White House disagrees with Foster's assessment.

"The Actuary has also raised concerns that implementing these cost-control measures may not be possible," healthcare messaging guru Stephanie Cutter wrote on the White House blog last month. "Once again, we disagree. History shows that it is possible to implement measures that will save money for Medicare and the federal government."

Last year's recommendations from the president's fiscal commission offer some indication of possible cuts. They include:

  • Cutting payments to hospitals for medical education (saves $60 billion through 2020);
  • Ending Medicare payments to hospitals and other providers for unpdaid deductibles and copays owed by beneficiaries (saves $23 billion through 2020); and
  • Requiring higher savings from home health providers (saves $9 billion through 2020).

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