Medicare Fee Cuts to Hit Physicians, April 2


CMS notified its Medicare Administrative Contractors (MACs) today (Friday, March 8) that the failure of Congress to act on sequestration will result in a two percent fee cut to Medicare providers, effective April 1, 2013.

In general, Medicare Fee for Service claims, with dates-of-service or dates-of-discharge on or after that date will incur a two percent reducation in Medicare payment. Claims for durable medical equipment (DME), prosthetics, orthotics, and supplies, including claims under the DME Competitive Bidding Program, will be reduced by two percent based upon whether the date-of-service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013.

The claims payment adjustment will be applied to all claims after determining coinsurance, any applicable deductible, and any applicable Medicare Secondary Payment adjustments. Though beneficiary payments for deductibles and coinsurance are not subject to the two percent payment reduction, Medicare’s payment to beneficiaries for unassigned claims is subject to the two percent reduction. 

The Centers for Medicare & Medicaid Services encourages Medicare physicians, practitioners, and suppliers who bill claims on an unassigned basis to discuss with beneficiaries the impact of sequestration on Medicare’s reimbursement.

The Budget Control Act of 2011 requires, among other things, mandatory across-the-board reductions in Federal spending, also known as sequestration.  The American Taxpayer Relief Act of 2012postponed sequestration for 2 months.  As required by law, President Obama issued a sequestration order on March 1, 2013.  The Administration continues to urge Congress to take prompt action to address the current budget uncertainty and the economic hardships imposed by sequestration.

How will physicians be affected?

Medicare payments to providers (physicians, hospitals, Medicare Advantage plans, Part D prescription drug plans, etc.) will be cut by two percent per fiscal year.  Exempted federal programs which will not be subject to payment cuts include:

  • All programs administered by the Department of Veterans Affairs
  • Grants to States for Medicaid
  • Children’s Health Insurance Fund
  • Non‐defense unobligated balances
  • Black Lung Disability Trust Fund Refinancing
  • Medical Facilities Guarantee and Loan Fund
  • Payment to Department of Defense Medicare‐Eligible Retiree Health Care Fund 
  • Payments to Health Care Trust Funds 
  • Payment to Radiation Exposure Compensation Trust Fund
  • Radiation Exposure Compensation Trust Fund 
  • Vaccine Injury Compensation 
  • Vaccine Injury Compensation Program Trust Fund
  • Black Lung Disability Trust Fund 
  • Department of Defense Medicare‐Eligible Retiree Health Care Fund 
  • Energy Employees Occupational Illness Compensation Fund
  • Postal Service Retiree Health Benefits Fund
  • Retirement Pay and Medical Benefits for Commissioned Officers, Public Health Service
  • All programs administered by the Department of Veterans Affairs
  • Grants to States for Medicaid
  • Children’s Health Insurance Fund

What other areas of healthcare will be impacted?

Other areas of healthcare will also face reductions under sequestration, including important graduate medical education (GME) funding, and drastic cuts of up to ten percent to the Centers for Disease Control and Prevention’s (CDC) vaccine and disease prevention efforts, the National Institutes of Health (NIH) and its research programs, and the Food and Drug Administration (FDA) food inspection and pharmaceutical safety efforts.

When will physician Medicare payments begin to be reduced?

CMS has some discretion on how it will implement the two percent provider cuts, and has not yet commented on how exactly it will do so, but actual payment reductions to physicians are not expected to begin until April 1.

While sequestration has begun, negotiations on deficit reduction can, and are expected to, continue. Congress is facing additional budgetary issues at this time including a Continuing Resolution (CR) funding the government that expires on March 27, and expiration of the suspended debt ceiling on May 19. Either of these could provide an opportunity for Congress to reach an agreement on deficit reduction and retroactively replace sequestration with it. If such an agreement is reached before the end of March, CMS could reprocess any claims from the interim at the original higher rate.

What has the AOA been doing to try to prevent the sequestration?

The AOA has sent numerous letters under the signature of President Stowers to Members of Congress regarding the negative impact of sequestration. In addition, the AOA has joined with numerous other physician organizations and state affiliates in delivering a similar unified message to Congress. The AOA legislative team has also conducted meetings with Members of Congress, leadership offices, and key congressional committees to discuss the issue and implore action to avert sequestration. We will continue these efforts to urge Congress to reach an agreement on deficit reduction and reverse the sequester and its impact on physician payment and other critical areas of healthcare.

What is the reaction of AACOM?

The American Association of Colleges of Osteopathic Medicine (AACOM) President and CEO, Stephen C. Shannon, DO, MPH, today issued the following statement on the implementation of the across-the-board sequestration cuts, which will ultimately result in reduced patient access to care and increased health care costs for vulnerable populations.

Sequestration has indiscriminately cut funding for non-defense discretionary (NDD) programs with an 8.2 percent across-the-board cut to funding levels and threatens graduate medical education (GME) through an automatic 2 percent cut under Medicare. According to the Coalition for Health Funding, of which AACOM is a member, public health, health research, and other NDD programs have been reduced $900 billion from the Fiscal Year 2011 Continuing Resolution, the bipartisan Budget Control Act, and the bipartisan American Taxpayer Relief Act. Yet these programs are not responsible for our growing debt. In fact, even completely eliminating all NDD programs would still not balance the budget.

The nation faces a projected shortage of 90,000 physicians by 2020. Even a short period of indiscriminate cuts is enormously disruptive to programs that are vital to our ability to continue training the future of our nation’s physician workforce. The osteopathic medical education community understands the dire economic situation our nation faces and the need to make hard choices to return our country to sound fiscal footing. While these important economic concerns must be addressed, it is critical that the process be judicious and that cost-effective programs be preserved. The cuts mandated by sequestration will be especially harmful to our country’s osteopathic medical schools and the future physicians they train.  

Exploring every available alternative to sequestration must continue to be an option. The consequences of these cuts are far too grave not to do so.

See AACOM’s recent letter, urging Congress to oppose sequestration and explore all viable alternatives.

What is Sequestration?

The Budget Control Act of 2011 increased the debt ceiling and set forth provisions to decrease the nation's deficit including the creation of the Joint Committee on Deficit Reduction.  The 2011 bipartisan committee then failed to meet its charge of reducing the deficit by at minimum $1.2 trillion.  As a result, sequestration requiring $1.2 trillion in budgetary adjustments over 10 years was triggered to begin on January 2, 2013, divided evenly between defense and non-defense programs, impacting both discretionary and mandatory spending, including Medicare. In the final hours of January 1, 2013, Congress approved the “American Taxpayer Relief Act (ATRA)” (HR 8) delaying sequestration and its accompanying 2 percent payment cut by 60 days to March 1. 


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