Budget issues threaten Medicare payments

January 12th, 2015

After slapping a Band-Aid on the Medicare sustainable growth rate (SGR) issue last winter, the issue is once again rearing its ugly head. Physician Medicare reimbursements are scheduled to drop by 27% beginning next year, unless Congress acts – and it’s unlikely the issue will be taken up until after the elections. And if that weren’t enough, a budget sequestration that will take effect in February 2013 will reduce payments by 2%.

Through the 2% budget sequester, Medicare providers will receive 98 cents for every dollar through 2021, totaling around $123 billion overall. The sequester – which will affect other federal agencies, including HHS – was the product of the Budget Control Act of 2011, signed into law when Congress could not reach an agreement on how to cut $1.2 trillion from the budget.

Any proposed solutions will be daunting and hard-fought. Deciding to override the sequester will mean finding other ways to make up that $123 billion that would be lost. The Congressional Budget Office estimates that blocking the SGR and maintaining current growth rates will cost $271 billion through 2022. A bill that would eliminate the SGR and reduce physician payments over five years has been proposed, but the likelihood of passage is unclear.

"What is the solution anyone has proposed?" Health Policy and Strategy Associates president Robert Laszewski told MedPage Today. "There are no fixes on the horizon."