CBO forecasts 29.4% cut in Medicare rate

The Congressional Budget Office (CBO) has projected that under the current law, Medicare payment rates for physician services will be reduced by 29.4 percent in 2012.

"The large reduction called for under current law follows several years of legislative action to either maintain or increase physician payment rates under the Medicare program when those rates were otherwise scheduled to decrease under the provisions of law known as Medicare's Sustainable Growth Rate (SGR) mechanism. Such legislative actions have overridden the SGR,” wrote CBO in a recent report titled “Changes in Payments to Physicians.”

CBO explored SGR change options that have been enacted since Congress began overriding scheduled reductions in physician payment updates in 2003. “Analysts have also discussed a 10-year freeze in payment rates,” CBO stated.

A "cliff" approach includes short-term adjustments in payment rates overriding the provision in Medicare law that requires the SGR target be adjusted to accommodate changes in spending. The provision in the current law would cap the reduction at the Medicare Economic Index (MEI) minus 7 percent in the year following the adjustment.

CBO also considered resetting the SGR, which would forgive all spending that has accrued above the cumulative targets and set both the cumulative target and cumulative spending to zero as of Dec. 31, 2010. An additional alternative mentioned is that the SGR could be replaced with a specified update, such as a 10-year freeze.

Read the 10-page report here.