Congress has once again extended the deadline, delaying Medicare payment cuts to physicians. On March 1, 2012, Medicare payments to doctors were scheduled to be cut by 27.4 percent. However, in a bipartisan vote, Congress has extended that deadline to December 31, 2012.

The cause for such potentially high cuts is based on the Sustainable Growth Rate (SGR) mechanism implemented in 1997. The system was designed to compensate for over spending (or under spending) on Medicare by decreasing or increasing the Medicare budget annually. However, since 2002, Medicare spending has consistently gone over the target budget. Under the SGR when spending increases, payments decrease. Because payment cuts have been deferred year after year, the percentage of potential cuts has continued to increase annually. So what may have been a Medicare pay-cut for physicians of a few percentage points in 2002 has accumulated to become the insurmountable 27.4 percent it is now.

While most agree that the formula is deeply flawed, no one can agree on how to fix it.  Slashing physician payments risks an exodus of physicians willing to accept Medicare and could have dire implications for the health of seniors, particularly as baby boomers begin to turn 65.  On the other hand, if the money does not come out of the Medicare budget, it must come from somewhere. But in an era of highly-publicized budget battles, no one is eager to syphon off monies from other, already thinly-stretched arms of government. At any rate, the issue of the physician pay-fix is not likely to resurface again until after the November elections.

If congress fails to act, a 27.4% cut to Medicare reimbursement payments for physicians is set to go into effect on January 1. Earlier this month, the Senate passed an amended version of the House Payroll Tax Bill. The Senate version of the bill extends the payroll tax holiday, unemployment benefits and the doc-pay cut freeze for another two months without giving the thumbs up to some of the other measures proposed by the House. The two-month extension would have given both parties more time to hammer out a compromise as to how the tax cuts would be paid for as well as other legislation within the bill.

Although the amended bill had bipartisan support in the Senate, passing by a vote of 89-10, it has lost traction in the house. On Tuesday, December 20 the House of Representatives rejected the bill, suggesting a one-year extension instead.

While both parties seem in favor of the tax holiday for the middle class and the physician reimbursement pay-cut freeze, debate rages on as to where the money will come from to pay for the extensions.

House Republicans voted to create a conference committee by which appointed members of the House and Senate would meet to create a compromise bill. However, both the Senate and the House have to vote to create such a committee, and since the Senate has already adjourned for the holidays, a vote from the Senate seems unlikely.

Yesterday, President Obama put the onus of responsibility in the hands of the House by giving a press conference in front of a giant countdown clock, which reads, “If the House doesn’t act, middle class taxes increase in…” The clock counts down the days, hours, minutes and seconds until the tax cuts expire. He said, “…if we don’t get my option through the Senate right now, and we do nothing, then on January 1st of this — of 2011, the average family is going to see their taxes go up about $3,000.  Number two: At the end of this month, 2 million people will lose their unemployment insurance.”

Although most of the recent press has been centered on tax hikes and unemployment benefits, the effects of a 27% drop in Medicare payments would be devastating to an already overburdened medical community. The fallout of such a dramatic decrease in reimbursements would likely mean far fewer physicians who can afford to accept Medicare and possibly fewer patients who can afford to receive quality care.