Plans to solve Medicare reimbursement crisis under way, but time is of essence

June 1, 2011

With all of the partisan bickering on Capitol Hill over the federal deficit, next year's federal budget and what to cut, it appears there may be a consensus building around the idea of finally resolving the Medicare reimbursement crisis. Unless Congress acts before Jan. 1, Medicare physicians will see a 29.5 percent reimbursement cut as a result of the sustainable growth rate (SGR) formula that is now used.

Key Points

Unless Congress acts before Jan. 1, Medicare physicians will see a 29.5 percent reimbursement cut as a result of the sustainable growth rate (SGR) formula that is now used. Now, based on both the budget proposals from President Obama and from House Republicans led by Rep. Paul Ryan (R-Wis.), it appears that at least a temporary correction could be in the offing.

President's plan

Likewise, the 10-year cost of repealing the payment formula is expected to exceed the $369.8 billion estimated in the budget, posing a huge challenge for lawmakers as they try to agree how to pay or whether to add it to the ballooning federal deficit.

In his budget, Obama proposed to fund the change through a series of Medicare, Medicaid and prescription drug policy changes that include the following:

In addition, the Obama budget would expand the proposed Independent Payment Advisory Board (IPAB) created in the healthcare reform law to control Medicare spending. The IPAB is strongly opposed by many physicians' groups, including the American Academy of Dermatology Association (AADA).

Republican plan

Meanwhile, the Republican budget, approved by the House on a party-line vote but considered dead in the Senate, contains these Medicare reform proposals:

Although the approaches to resolving the Medicare payment issue are vastly different, the fact that both sides acknowledge the problem and the need to address it, in writing, can be considered a positive sign.

Nevertheless, the cost is great and ever increasing, and the need to find a solution comes in the midst of a national fiscal crisis that will be at the heart of next year's presidential and congressional elections campaigns.

It won't be easy.

Bob Gatty, former congressional aide, covers Washington for businesses specializing in healthcare and related issues. Contact him at bob@gattyedits.com
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