CBO: 30% Medicare Physician Pay Cut in 2012

According to a Congressional Budget Office (CBO) report released this week, Medicare payments to physicians will be reduced by 29.4% on Jan. 1. 2012, unless Congress takes action. 

The reduction is the result of several years of legislative action intended to either maintain or increase Medicare physician payments as those rates were scheduled to decrease according to Medicare’s Sustainable Growth Rate (SGR), a mechanism used to determine reimbursement rates.

There is general consensus that the SGR needs to be amended. Determining how best to change the formula has been the topic of numerous congressional hearings this year.  CBO's new report provides input into the costs of proposals to replace or amend the Medicare fee schedule formula. CBO reports that if Congress were to eliminate the SGR and freeze Medicare payments to physicians at current rates, the cost to the federal government would be almost $298 billion over 10 years. By contrast, providing a 2% pay increase each year until 2021 would cost $389 billion over 10 years. One of the less expensive options would be to reset the SGR by having Congress forgive all previous spending above the cumulative targets as of the end of 2010.  That solution would cost $195 billion over 10 years.


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