Current Events Hospitals Medicare Physician Compensation

The Doc Fix and the Fiscal Cliff

President Barack Obama has signed the American Taxpayer Relief Act of 2012, which continues current Medicare payment rates for the nation’s physicians through Dec. 31, 2013. This bill nullifies the Sustainable Growth Rate which, if implemented, would have reduced Medicare payments to physicians by 26.5 percent.  The doc fix will cost $10.6 billion in fiscal year 2013.  This same issue appears every December year after year.  Reason Magazine notes that this is just another example that Congress is not able to stick to promises to cut spending in the future.

According to Health System Review, “The new legislation also halts sequestration for two months to prevent a 2 percent spending cut for all Medicare providers, extends the Medicare 1.0 RVU GPCI floor through December 31, extends the Medicare therapy cap exception process through the end of the year and increases the Medicare therapy service multiple procedure payment reduction to 50 percent effective April 1.”  (for more detail, see a DoctorsManagement report).

From the list above, you can see that physicians also won another battle by keeping the GPCI work floor set to a minimum of 1.0. The work GPCI adjusts physician payments based on geographic variation in physician wages. Thus, all physicians in low-wage areas will now receive the same reimbursement for work RVUs as the national average physician.

If doctors won, then who lost?  The answer is hospitals.

WSJ’s Washington Wire reports that “Several pieces of the bill, which is headed for President Barack Obama’s desk, would reduce federal payments to hospitals in exchange for staving off cuts to doctor’s pay. Hospitals are calling it a raid on their funding, which has already been subject to cuts in the health overhaul law.”

Specifically, KFF reports how Medicare reimbursement to hospitals would decrease.

First, it would cut $10.5 billion from projected Medicare hospital payments over 10 years for inpatient or overnight care through a downward adjustment in annual base payment increases.  The Senate measure also would reduce Medicaid disproportionate share payments to hospitals by an additional $4.2 billion over the next decade.   These cuts are on top of those made to hospitals as part of the 2010 health care law.

Analysis by Nguyen and Sheingold stated that the DSH adjustment as was implemented by the ACA seemed reasonable, but payments for medical residents (IME) are too high.  Nevertheless, this bill further reduces DSH payments.  This cut may be reasonable, however, since the number of individuals without insurance will likely fall due to the ACA.

The CBO evaluates the fiscal impact of the American Taxpayer Relief Act and finds that the deficit would increase by almost 4 trillion dollars over the next 10 years.


  1. I agree. My thanks for posting that. I’ll return back to find out more and tell my coworkers about your posting.

  2. To arrive at the estimate that the Taxpayer Relief Act will increase the debt by 4 trillion dollars, the CBO compared the Act to the then current law calling for all taxes to increase. Absolutely no one thought that that across the board increase would be allowed to stand, but it was the law at the time.

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