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Cuts to Some Medicare Payments Provide Offsets for ‘Doc Fix’

The Senate-passed fiscal cliff bill would block for one year a scheduled 27 percent cut in reimbursements for Medicare physicians, paid for by familiar cuts and adjustments to other provider payments.

The bill (HR 8) would keep reimbursement rates steady through Dec. 31, 2013 — providing one more in a series of short-term patches for the Medicare physician payments.

The Senate passed the bill 89-8 early Tuesday. House plans for a vote are still are uncertain.

The cost of the one-year patch is $25.1 billion over 10 years, according to the Congressional Budget Office. The Medicare offsets and other provisions would reduce spending by $25.7 billion over the same time period.

Although Congress has made efforts to find a replacement for the current reimbursement formula, which has called for payment cuts for the past decade, lawmakers have not agreed on a solution.

This cost of avoiding the payment cuts is offset by adjustments to several other Medicare providers, many of which have been used to pay for previous “doc fix” patches.

Democrats resisted pressure to pay for the cost of the fix by cutting spending from the 2010 health care overhaul (PL 111-148, PL 111-152), according to the Obama administration.

“The President stood firm against Republican proposals to pay for this fix with cuts to the Affordable Care Act or the beneficiaries,” the White House said in a written statement Tuesday.

Hospitals would take some of the biggest hits to help pay for the cost of the doc fix in the bill. Recouping overpayments made to some hospitals for how they coded services under a payment system called “Medicare Severity Diagnosis Related Groups” would save $10.5 billion.

The measure also would extend lower Medicaid payments to hospitals that treat a high number of uninsured or low-income beneficiaries, known as disproportionate share hospitals, saving $4.2 billion. The health care law reduced payments to those hospitals, and those payment cuts were also extended in the most recent doc fix (PL 112-96.)

Hospital groups protested the bill’s effect on their organizations.

“While fixing the physician payment formula is essential, it should not be done by jeopardizing hospitals’ ability to care for seniors and their communities,” said Rich Umbdenstock, president and CEO of the American Hospital Association, in a statement. “We will continue to work with Congress to find a permanent solution to the Medicare physician payment problem, while remaining vigilant against additional cuts that could be harmful to hospitals’ ability to fulfill their mission of caring.”

Chip Kahn, president and CEO of the Federation of American Hospitals, said he would ask Congress to reconsider the cuts to hospitals.

“It is not in the best interest of patients or those who care for them to rob hospital Peter to pay for fiscal cliff Paul. These cuts could impact hospital services for those who need them the most,” Kahn said in a written statement.

Another offset would save $4.9 billion by changing the bundled payment given for end-stage renal disease services, accounting for changes in behavior and use of dialysis drugs. An additional $300 million would come from cutting payment rates by 10 percent for non-emergency ambulance services used by patients with end-stage renal disease.

An additional $1.8 billion would be saved by further reducing reimbursement for multiple therapy procedures when performed on the same day. And Medicare would save $800 million by adjusting payments to account for more efficient use of medical imaging equipment.

The fiscal cliff deal also would rescind all unobligated funds for a program in the health care law to help set up consumer-oriented nonprofit health plans. The bill would create a contingency fund of 10 percent of current unobligated funds to help co-op plans that have already been approved. Savings from that provision amount to $2.3 billion.

Under the bill, the Medicare Improvement Fund would be eliminated, saving $1.7 billion. In addition, insurance companies competing in Medicare would be affected. A “coding intensity adjustment” to payments to Medicare Advantage plans would cut them by $2 billion.

The bill also would extend several Medicare payment policies that expired Dec. 31. That includes continuing for one year a process allowing exceptions to a per-beneficiary cap on payments for outpatient therapy services provided outside of hospitals. It also extends the cap for therapy services received in hospital outpatient departments for one year.

Additional payments for some ground ambulance services would be continued for one year, and those for some air ambulance services through June 30, 2013.

The “physician work index” which accounts for regional differences in the cost of resources needed to provide Medicare physician services would be continued for one year.

A program that allows Medicaid to pay Medicare Part B premiums for some low-income beneficiaries would be extended for one year, as would the program that allows some low-income beneficiaries to maintain Medicaid coverage as they transition to employment.

John Reichard contributed to this story.

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