Part B Therapy Cuts Delayed to June 1

As a follow-up to a post from last week regarding pending cuts in Part B therapy rates, last evening the House passed a bill that the Senate had passed earlier in the day, included within is a provision to delay the pending cuts to the physician fee schedule until June 1.  The provision is tucked within a broader bill that extends COBRA subsidies and unemployment benefits to long-term unemployed individuals.  The provision covers the period from April 1 to June 1.  A prior measure, tucked into a jobs bill, delayed the cuts until April 1.  Congress was on recess for the Easter Holiday, returning this week.  It was expected that upon return, Congress would institute another temporary fix, pushing the reduction out for at least another month; in this case, two months.

The rates for Part B therapy are tied to the physician fee schedule which is targeted by law, for a 21% reduction.  The fee schedule formula is a sore issue for Congress and physicians both, at times for opposite reasons.  In periods of economic expansion, the annual inflation mechanism built into the formula can adjust the fee schedule dramatically upward, in excess of consumer inflation.  In periods of economic contraction, the formula produces dramatic cuts, such as the case set for 2010. (1)  Congress has sought for years to amend the economically contrived formula that produces such wild swings but has failed to find a middle ground approach that physicians can agree upon.  During the debate over health care reform legislation, fixes to the fee schedule problem were imbedded within inital legislation passed by the House as a permanent solution and manipulated by the Senate in a more limited method in its version.  The real crux of the issue boiled down to the costs associated with a permanent solution, estimated at $250 billion or more.  With little price-tag wiggle room as reform became final in the Patient Protection and Affordable Care Act, the fixes to the physician fee schedule dilemma moved to a side issue.  Given that the Part B therapy rates are mired within the fee schedule issue, the same fate of potential cuts also remained unaddressed at the time the President signed the final reform legislation into law.

The temporary delay in cuts, now set to sunset on May 31 only moves forward the same damning set of political issues.  Congress and the President are trying to commit to a reform mantra that is “savings” driven.  As the political landscape is clearly divided and mid-term elections loom closer, additional unfunded spending is the last element any “up for re-election” politician wants to come close to.   Congressional Democrats have crafted a middle-ground approach that would delay the cuts to October 1 (the start of the new federal fiscal year)  or perhaps out into 2015, freezing Medicare rates for the duration.  Physicians, preferring a complete revision to the formula and deficit hawks, preferring to let the reductions occur in large part, oppose the Democrats approach.

Tackling the funding and the fee schedule/Part B issue separately as a single new piece of legislation, in my estimation, won’t occur this year.  What I believe is likely to happen is that a longer term fix, perhaps until the end of the year, will get tucked into another broader spending bill, delaying once again, the core problems associated with the fee schedule and Part B.

(1) The physician fee schedule increases are tied to an economic sustainability formula that applies the Medicare Economic Index to a target called the Sustainable Growth Rate.  Essentially, the Index is a measure of inflation designed to reflect the costs physicians face with respect to their practice and to wage levels.  The Growth Rate is calculated based on medical inflation, the projected growth in the economy and the projected growth in the number of Medicare fee-for-service beneficiaries plus any changes in rules, laws or regulations as applicable.  Congress has tinkered with the application of this formula, freezing the implementation of cuts at 0% , most recently through March 31, 2010.

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