House and Senate Struggle to Find Agreement on SGR Fix, Tax Extenders - December 13, 2011

With the year winding down, Congress is working on time-sensitive year-end legislation. Of the many "must pass" items is a patch to the sustainable growth rate (SGR) formula. The SGR patch would prevent a 27.4 percent reduction in Medicare payments for physicians set to begin on Jan. 1, 2012. Congress is considering potential offsets to pay for the short-term fix, which would cost $21 billion for 1 year and $38 billion for 2 years.

NAPH is pleased that policymakers agree with our position that Medicaid should not be used as a major offset to pay for the SGR. However, some of the options under consideration include reductions to Medicare hospital payments – including a drastic cut in hospital outpatient department evaluation and management services, reductions in Medicare bad debt reimbursements and decreased payments to inpatient rehabilitation hospitals. The hospital outpatient department evaluation and management cuts, which were once considered by the Medicare Payment Advisory Commission, would cap payments for non-emergency services at a rate closer to reimbursements for similar, in-office physician visits. This cap could lead to a 74 percent reduction in hospital payments. NAPH supports finding a solution to the SGR formula, but not at the expense of our hospitals. On Dec. 5, NAPH and other hospital associations sent a letter to Congress opposing Medicaid and Medicare hospital cuts for the SGR fix. We urge members to reach out to their congressional delegations and insist that Congress protect payments to hospitals.

Lawmakers must also come to an agreement on the payroll tax, which is scheduled to rise to 6.2 percent in January. Keeping the tax at its current 4.2 percent level would cost the government $120 billion. The Obama administration and congressional democrats have called for the payroll tax to be lowered to 3.1 percent, at a cost of $180 billion. Congress is also considering the extension of long-term unemployment benefits, which could cost up to $55 billion depending on the final legislation. According to Congressional Budget Office estimates, the total cost of the items currently being negotiated is more than $350 billion. Coupled with politics and party ideology, this financial burden is making compromise difficult.

Last week, NAPH sent out a Special Update (members only) on the SGR fix and tax extenders. NAPH will continue to provide updates as Congress works to finalize these issues – check Newsline and the NAPH website regularly.