Does Obamacare cut Medicare by $716 billion dollars? Yes, but not exactly the way it is being presented by politicians.
For example the cuts are not in payments to physicians, the bulk of the cuts are to hospitals (34.8%) and Medicare Advantage Plans (30.2%). The remaining cuts are a lot smaller; extra funds to hospitals that see more uninsured patients — 5 percent in savings. Lower payments to home health providers make up another 8.8 percent. About a dozen other similar size cuts make up the balance.
Now as far as physicians are concern, there are major cuts on the horizon — sort of — but these cuts were separated from Obamacare early on. Come January 1st physician payments under Medicare may be cut by 27% but not because of Obamcare and not part of the $716 billion. Rather these cuts will be caused by the Sustainable Growth Rate (SGR) law. Here is what the CBO says. I added the bold highlight.
Medicare’s payment rates for physicians’ services are scheduled to be reduced by 27 percent in 2013, CBO estimates, under the provisions of law known as Medicare’s Sustainable Growth Rate (SGR) mechanism. The SGR mechanism consists of expenditure targets, which are established by applying a growth rate (calculated by formula) to spending for physicians’ services and certain related services in a base period, and annual adjustments to the payment rates, which are designed to bring spending in line with the expenditure targets over time. In each of the past several years, legislation has been enacted to override the SGR and to either maintain or increase those payment rates when they were otherwise scheduled to decrease.
And in a separate report CBO says this:
The Congressional Budget Office (CBO) projects that, under current law, payment rates for physician services will be reduced by 29.4 percent in 2012. That large reduction called for under current law follows several years of legislative action to either maintain or increase physician payment rates under the Medicare program when those rates were otherwise scheduled to decrease under the provisions of law known as Medicare’s Sustainable Growth Rate (SGR) mechanism. Such legislative actions have overridden the SGR.
As of now, Congress has not acted on changing the SGR to once again prevent these cuts or mitigate them, but who knows what will happen by year end.
In any case while it is true that there are no cuts to Medicare benefits, it is also true that all these cuts will have consequences. Some hospitals will not be able to deal with the cuts, eventually Medicare Advantage Plans will have to make up the lost revenue (now being offset mostly by performance bonuses HHS is paying) which means higher premium or a cut back of the extra benefits often provided by these plans. If the physician cuts go into effect Medicare beneficiary access to care may be affected and/or more cost-shifting to the non-Medicare population is likely.
If you would like to read the AMAs position on the physician payment cuts here it is from their website:
Physicians received a 10-month reprieve from a 27 percent cut in Medicare payments scheduled for March 1, extending current payment rates through the end of the year, under an agreement reached by a House-Senate conference committee. The agreement is part of a deal to extend a payroll tax cut and added unemployment benefits. This is the 14th short term patch to the SGR in the last 10 years. The AMA will continue to urge Congress to repeal the SGR and stop this terrible cycle that breeds uncertainty for physicians and their practices, and continually threatens seniors access to critical care.
“The House and Senate conference committee agreement averts a 27 percent cut on March 1, but it represents a serious missed opportunity to permanently replace the flawed Medicare physician payment formula and protect access to care for military families and seniors,” said AMA President Peter W. Carmel, MD.
Because Congress once again failed to repeal the SGR, the Congressional Budget Office projected that the next cut, scheduled to occur on January 1, 2013, will be about 30 percent. Repealing the SGR remains the sound, fiscally prudent policy choice. The AMA will continue to urge Congress to repeal the SGR and stop this terrible cycle that breeds uncertainty for physicians and their practices, and continually threatens seniors access to critical care.
Related articles
- AMA, Physician Groups Outline Payment Reforms to Finance … – Bloomberg BNA (bna.com)
- An Itsy Bitsy $716 Billion Medicare Q&A (motherjones.com)
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