Health Care Lawyer Blog

Today's post was authored by FHWN law clerk Scott Malott

Doctors and patients that rely on Medicare for health care coverage can breathe a sigh of relief today, as the United States Senate has voted to delay a 23% pay cut for Medicare services by one month. The reduction was set to take effect on December 1, 2010, and the Senate has delayed it to January 1, 2011, which it hopes will allow enough time to develop a more permanent solution.

Extending the pay cut is nothing new, however; these are the same pay cuts that the federal government extended by six months in June, by two months in April, and by one in March. In fact, the legislature has been delaying these cuts since they were set to take effect in 2002. The cuts are due to a 1990s budget balancing law that created the Medicare sustainable growth rate (SGR) formula, which was intended to control Medicaid spending by imposing annual reductions. That formula called for a 4.8% cut in 2002, and because of the repeated delay, the necessary reduction to meet the formula’s guidelines is now 23%.

While Senators Baucus and Grassley have stated that they hope to pass a mutually acceptable 12-month postponement by the end of this year, the American Medical Association (AMA) is stumping for repeal of the SGR formula altogether. The AMA says that its members simply cannot afford the pay cuts, and many doctors have said that they may stop accepting Medicare patients if the pay cuts go through. While both Democrats and the newly empowered Republicans agree that there needs to be a solution, the difficulty comes in how to pay for it. The one-month delay that the Senate agreed to this week comes at a cost of $1 billion over the next 10 years. To completely repeal the formula, the legislators will have to come up with an estimated $300 billion over the next 10 years.

Whatever the solution, this discussion is bound to arise again before the new scheduled pay-cut date of January 1.

Following the results of Tuesday's election - which President Barack Obama referred to as a "shellacking" for the Democratic party - many states and congressional districts across the country are "seeing red." While post-election days are usually filled with lofty speeches from incumbents touting their agendas to-be, many of the newly-elected GOP politicos seem to have a similar goal - repealing PPACA (or, as many call it, "Obamacare").

The day after the election, Speaker of the House-to be John Boehner stated that the Republican plan is to lay the groundwork for repealing PPACA. Reports from other sources, including the Dow Jones Newswire, also state that the House Republicans plan to vote early next year on legislation to repeal the law. However, even if the vote happens very quickly, whether the GOPers will actually be able to achieve their mission remains doubtful. Specifically, even if the GOP-dominated House votes to repeal the bill, a similar initiative will likely fail in the Senate and has no chance of avoiding a presidential veto. (The Senate membership currently is roughly equal Republicans and Democrats, with Democrats having a small advantage in numbers.) Additionally, some provisions of PPACA - such as allowing dependents to stay on their parents' coverage until the age of 26, and forcing insurers to cover children with pre-existing conditions, are quite popular and may prohibit a full-scale rollback.

Notwithstanding the projected political gridlock, another option for Republicans is to deny the funding needed to carry out PPACA's mandates. According to health care policy experts, the GOP will not be able to stop funding completely but they can keep it from growing by putting the Department of Health and Human Services "on a diet". However, since Congress does not have a current budget (rather a stop-gap measure to keep important agencies - such as HHS - funded at past levels), Congress is likely to pass another resolution to keep the government running at such levels through the spring. This means that any funding cuts won't kick in until Spring 2011, and it's likely they may even be delayed until October.