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October 21, 2021

Looming Medicare Payment Cuts: Will Congress come to the rescue again?

As the great Yogi Berra said, “it’s deja vu all over again.” Like last year, physicians face significant cuts under Medicare unless Congress steps in to intervene.

So how did we get here? As you may recall, the Centers for Medicare & Medicaid Services (CMS) finalized a policy in the Calendar Year (CY) 2021 Physician fee schedule (PFS) final rule (released in early December 2020) that significantly increased payments for office and outpatient evaluation and management services (E/M) services starting this year. There is an existing budget neutrality requirement under the Medicare PFS which forces CMS to make an overarching negative adjustment to physician payments to counterbalance any increases in code values that CMS implements. CMS usually does this by adjusting the Medicare “conversion factor” which converts the building blocks of PFS codes (relative value units or RVUs) into a dollar amount. CMS was all set to implement a significant reduction to the conversion factor in 2021, until Congress stepped in and instituted a number of policies in a December 2020 omnibus bill that blunted the cut. Most notably, Congress added back enough funding to the PFS to offset 3.75 percent of the reduction to the conversion factor.

The 3.75 percent bump-up to the conversion factor that Congress provided only helped 2021 Medicare payments. Unfortunately, since the office and outpatient E/M policy is still in place in 2022, there must be another downward adjustment to the conversion factor in 2022 to preserve budget neutrality. Therefore, CMS is proposing a 3.75 percent cut to the conversion factor in 2022—and it will be up to Congress once again to come in with a fix to avert this cut.

While a 3.75 percent cut is bad enough, it gets worse. On top of the 3.75 percent reduction to the PFS conversion factor are two additional cuts from an across-the-board reduction mechanism Congress put into place to control government spending called “sequestration.”

Sequestration acts like a payment “chopper.” Whatever payment you as a physician are owed by Medicare for delivering a service is simply chopped by a specific percentage. Congress instituted a 2 percent Medicare sequester as part of the Budget Control Act of 2011. The sequester has been place since 2013, but luckily has been put on hold during much of the COVID-19 public health emergency. Unfortunately, the moratorium on the 2 percent sequester is set to expire at the end of the year—meaning that it will rear its ugly head once again starting on January 1, 2022. Congress unfortunately loves using this sequester as a way to pay for additional spending way out into the future. Thus, once the 2 percent sequester starts up again, it is set to continue until 2030!

One sequester is bad enough, but unfortunately another one triggered with the passage of the American Rescue Plan—the $1.9 trillion COVID-19 stimulus package that was signed into law in March of this year. This sequester is called a “PAYGO” sequester and is used as a mechanism to offset large increases in the federal deficit. The PAYGO sequester will result in another 4 percent cut to Medicare spending.

Adding up the PFS conversion factor cut of 3.75 percent and the two sequester reductions (2 percent and 4 percent), you get a total cut of 9.75 percent. I don’t have to tell you what impact a nearly 10 percent cut to Medicare payments in 2022 would have on you as emergency physicians! It would be catastrophic.

ACEP, along with other medical associations, has raised the alarm and strongly pushed Congress to intervene. We made this issue a main topic during our Leadership and Advocacy Conference in July and issued action alerts requesting that you contact your Congressional representative.

Last week, we got a good sign that our advocacy efforts may be working. Over half of the members of the House of Representatives (247 in total) joined a bipartisan "Dear Colleague" letter to Speaker of the House Nancy Pelosi (D-CA) and Minority Leader Kevin McCarthy (R-CA), urging them to provide stability for health care providers by addressing the looming payment cuts. We hope that this letter will create some momentum and result in Congress including a fix in a year-end legislative package.

Even if Congress does step in for the second straight year, we are unfortunately now in a never-ending cycle of looming cuts to Medicare physician payments. For example, if Congress just institutes another one-year 3.75 percent bump up to the conversion factor in 2022, CMS will likely again propose a cut to the conversion factor in 2023. And, with respect to the two sequesters, although Congress will hopefully eliminate the 4 percent PAYGO sequester in any legislation it passes this year, I’m not too optimistic about the 2 percent Medicare sequester. As stated earlier, Congress already extended that sequester to 2030 and it is more than likely here to stay.

What we truly need is meaningful Medicare payment reform, including annual updates that actually reflect the increased year-to-year cost of providing services. Medicare payments to facilities (like hospitals) receive inflationary updates each year, but not physician payments! Sadly, every year we fight to prevent a cut, and are happy if payments remain flat. This is simply unsustainable—and it’s not just physician advocates like me who are saying this. As I mentioned in a previous Regs & Eggs blog post, the CMS actuaries state in the Medicare 2021 Trustees Report that due to the low reimbursement rates, access to Medicare-participating physicians will become a significant issue in the long term.

The reason Congress hasn’t instituted any meaningful increases in Medicare physician payments is simple: it is extremely expensive. When Congress passed the Medicare Access and CHIP Reauthorization Act (MACRA), it tried to keep the overall cost of the legislation low by including small physician updates over time. The law included a 0.5 percent from July 2015 through then end of 2019, and then a 0.0 percent update from 2020 through 2025. Starting in 2026, there will be a 0.75 percent update for physicians and other clinicians who participate in certain alternative payment models and a 0.25 percent update for everyone else. All these updates are much less than what inflation is projected to be. MACRA was seen as a permanent solution to the flawed “sustainable growth rate” (SGR) formula, but in the end, we have the same result—unsustainably low payments.

Even one-year fixes to Medicare physician payments cost billions of dollars, so you can imagine what the cost would be for a permanent fix that includes reasonable annual updates. Will Congress ever institute meaningful reform to physician payments? If access to Medicare-participating physicians becomes a huge issue like the CMS actuaries project, would Congress act at that time? Only time will tell, but unfortunately in the meantime, we will likely have to continue engaging in this annual effort to convince Congress to intervene simply to keep your Medicare payments flat.

Before concluding, I have a quick programming note. There will be no Regs & Eggs next week, and it will return in full swing the following Thursday on November 4th. Until then, this is Jeffrey saying, enjoy reading regs with your eggs.

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