Capitol Hill Report: Congress Divided on SGR Fix—Cuts Looming January 1

December 22, 2011


By Mike Amery, Legislative Counsel, Federal Affairs, (202) 506-7468,

UPDATE (12/23/11): Shortly after this was published, the House and Senate came to an agreement on a two-month fix that includes Senate agreement to appoint conferees to a conference committee that will meet shortly after the new year in order to craft a one-year extension of the unemployment benefits and payroll tax cut and a two-year extension of the SGR fix.

Good News—NIH a Big Winner

Heading into the last weeks of December, Congress faced two "must-pass" bills. The good news is it passed the FY2012 Appropriations bills that completely fund government through September 2012.

The AAN can claim some success with the National Institutes of Health being one of the big winners in the bill, receiving almost $300 million over FY 2011. Increased funding for research was and will remain a top priority for the Academy. Thanks to all the AAN members who contacted Congress about the importance of NIH funding throughout the year.

In another success, the Independent Payment Advisory Board (IPAB) saw its budget slashed by nearly two-thirds prior to its appointment in 2013. The IPAB is the board created by the Affordable Care Act that will shift much of the Medicare physicians funding decisions to an independent board rather than Congress. For more details, please see my past Capitol Hill Report on IPAB.

Bad News—SGR Cut Looms

Unfortunately, Congress has not come to an agreement on the other "must-pass" bill that would fix the scheduled cut called for by the Medicare Sustainable Growth Rate (SGR) formula, which now stands at 27.4 percent on January 1, 2012.

The House passed a bill which would delay the cut and provide a 1-percent increase in Medicare physician payment for two years. The bill also included an extension of unemployment benefits, an extension of the payroll tax cuts for 2012, and a controversial provision dealing with a pipeline called Keystone XL designed to haul synthetic crude oil from Canada down through the Central United States. The bill was fully paid for using a variety of different sources, including a number of different funds from the Affordable Care Act.

The Senate, unwilling to go along with many of the spending cuts used to offset the costs, responded by passing a bipartisan, two-month patch that freezes Medicare payments and provides extensions of the other provisions. Shortly after their bill passed, senators left Washington, DC, for the holidays.

The House responded by refusing to go along with the Senate and instead appointed several House Republicans to a formal House/Senate conference committee in hopes of ironing out differences in the bills passed by both bodies.

At the time of publication, House Minority Leader Nancy Pelosi (D-CA) refuses to appoint Democratic conferees, and Senate Majority Leader Harry Reid (D-NV) said that he would not call the Senate back into session and has demanded that the House pass the Senate's version of the bill. The situation is very fluid and changes on a daily and nearly hourly basis.

AAN Response

The Academy recognizes that this final bill that needs to pass Congress in order to prevent an SGR cut is controversial. It contains a number of issues completely unrelated to physician payments and access to care for Medicare beneficiaries. No one in the House or Senate is calling for physician payments to be cut. But without hope for a permanent fix, two years is better than two months. So, the Academy sent a letter to congressional leadership supporting a two-year SGR fix.

CMS Will Hold Claims

Recognizing that Congress might not come to an agreement on SGR before the end of the year, the Centers for Medicare and Medicaid Services (CMS) is implementing plans to hold physician payments starting January 1 in order to minimize the impact on physicians as much as possible. CMS will hold claims for 10 business days through January 17 if Congress fails to pass legislation preventing the cut. CMS said the hold should have a "minimal impact" on doctors, since claims are never paid until two weeks after they are received.

However, after January 17, the cuts will proceed if Congress hasn't prevented them. Medicare Deputy Administrator Jonathan Blum said doctors can expect the 27-percent cut in their rates "because the backlog from more than a couple of weeks of waiting for lawmakers could cause the program's computers to crash. We feel that [Medicare] came very close operationally to crashing our system back in 2010," Blum said in a Washington Post story. "From a stewardship perspective, that is something we feel we can never repeat again."

CMS said they would notify doctors on or before January 11 with additional information on the status of payments. In June 2010, CMS held Medicare payments for 18 days while Congress struggled to pass a similar SGR fix.

Divided Government or Democracy?

Everyone agrees that payroll tax cuts, unemployment insurance, an SGR fix, need to be taken care of. However, House Republicans and Senate Democrats have set up an important and potentially deadly game of chicken. Some would say it is the price of divided government, others would say it is democracy in action.

Meanwhile January 1 looms closer.