• Congress Delays Medicare Cuts until 2015
  • April 4, 2014 | Authors: Eugene Y.C. Ngai; Lauren Lee Tarantello
  • Law Firms: Sheppard, Mullin, Richter & Hampton LLP - Los Angeles Office ; Sheppard, Mullin, Richter & Hampton LLP - Costa Mesa Office
  • On March 31, the Senate voted to pass yet another “doc fix” bill, which had been approved by the House the week before. This doc fix bill marks the 17th time that Congress has postponed the implementation of the Medicare Sustainable Growth Rate (SGR) payment formula since 2003. It comes at the 11th hour, as the SGR, put in place by the Balanced Budget Act of 1997, would have meant a sharp 23.7% drop in Medicare payments just hours later on April 1.

    The SGR payment formula was originally proposed so that amounts paid by Medicare for services would track the overall growth of the economy. However, when healthcare costs grew much more quickly than the economy, flaws in the SGR payment formula were revealed because payments to providers would have been insufficient to cover their costs. Congress has not yet passed a long term solution to this problem, and has relied on almost annual doc fixes to avoid a sudden drop in Medicare payments to providers.

    This latest doc fix, entitled Protecting Access to Medicare Act of 2014, again temporarily delays the looming cuts in Medicare payments, replacing the 24% cut with a 0.5% payment update through the rest of 2014, and also delays the implementation of the two-midnight rule (in which Medicare will only pay for inpatient hospital admission if the patient requires a stay of at last two midnights) until March 31, 2015.

    Congress is still working on a full repeal of the SGR. Although the House recently passed a bill that would repeal the SGR and replace it with a system that rewards providers based on quality measures or participation in an alternative payment model like ACOs, Congress has yet to find a way to pay for the change. The Congressional Budget Office (CBO) estimates that repealing the SGR would cost approximately $116.5 billion over ten years.