Delay on Doctors’ Medicare Pay Cut Gives Time for Longer Fix

November 19, 2010, 12:03 AM EST

By Drew Armstrong and Alex Wayne

Nov. 19 (Bloomberg) -- A one-month deal to delay a 23 percent reduction to doctors’ Medicare pay rates will buy more time for U.S. lawmakers who are seeking to hold off future cuts.

Medicare, the U.S. government health insurance program for the elderly and disabled, has cost control formulas that demand the rate cuts. Senator Max Baucus, a Montana Democrat who chairs the Senate Finance Committee, and Senator Charles Grassley of Iowa, the committee’s senior Republican, reached an agreement that will postpone the doctor pay cut until Jan. 1 from Dec. 1.

Physicians may withdraw from Medicare if the scheduled cuts are imposed, the Chicago-based American Medical Association said in a Nov. 15 statement on its web site. Baucus and Grassley said they are working on a one-year solution to provide certainty to doctors and patients concerned the one-month delay is just a temporary reprieve.

“We have set a path to ensure seniors and military families can continue to get quality health care,” Baucus and Grassley said in an e-mailed statement.

The one-month postponement will cost $1 billion, Baucus and Grassley said, paid for with savings from planned cuts in Medicare reimbursement for therapy services. The Senate approved the plan late yesterday. It still must be passed by the House of Representatives.

Medicare covers about 46.6 million people, according to the Kaiser Family Foundation, a nonprofit research group based in Menlo Park, California.

The formula that governs doctor payment rates began calling for cuts in 2002, according to the Congressional Budget Office. In 2003, Congress stepped in and prevented the annual pay reduction from being imposed. Since then, lawmakers each year have stopped the planned pay rate cuts.

Because the formula is designed to reduce total spending from year-to-year, the fee cuts have grown to 23 percent from the proposed 4.8 percent reduction in 2002.

--Editors: Andrew Pollack, Reg Gale.

To contact the reporters on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net; Alex Wayne in Washington at awayne3@bloomberg.net.

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net.