Pres. Obama Signs Tax Bill Forestalling Physician Pay Cuts

On Dec. 23, 2011, just hours before leaving for the holidays, Congress acted to stall a 27.4 percent cut in Medicare payments that would have gone into affect Jan. 1 of this year. The measure was part of a larger package that included extensions of payroll tax cuts and unemployment benefits. President Barack Obama signed the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA) into law the same day.

The legislation extends current payment rates for the first two months of 2012, by which time Congress will have to act once again to prevent drastically lower reimbursement for Medicare physicians. President Obama said he desires a full year extension of the tax cuts, and urged Congress not to allow a full-year renewal to get bogged down by the same partisan bickering that delayed the two-month extension.

“When Congress returns, I urge them to keep working without drama, without delay to reach an agreement that extends this tax cut, as well as unemployment insurance through all of 2012,” he said.

What many stakeholders truly desire, however, is not an extension of the current payment rates, but a permanent fix for the Sustainable Growth Rate (SGR) methodology used to set Medicare payment rates. Almost every year for a decade, Medicare expenditures have surpassed targets, and the SGR has called for substantial cuts. Since 2003, Congress has intervened to prevent the SGR-mandated reductions. These deferments do not abolish the SGR—instead they allow mandated payment cuts to accumulate and grow larger each year. Without a permanent fix, expected reductions will top 30 percent in 2013.


While the physician fee schedule update will be zero percent through Feb. 29, other changes to the relative value units used to calculate the fee schedule rates must be budget neutral. To make those changes budget neutral, the conversion factor must be adjusted for 2012. The revised conversion factor to be used for physician payment is $34.0326 as of Jan. 1, 2012.

CMS recently adjusted the 2012 Medicare Physician Fee Schedule (MPFS) to implement the zero percent update. Medicare administrative contractors (MACs) will be holding new, January 2012 claims for up to 10 business days in order to effectively test and implement the new 2012 MPFS. According to Palmetto GBA, Part B MAC for Jurisdiction 1, these claims should be released into processing no later than Jan. 18. Claims with dates of service prior to Jan. 1 are unaffected.

Note: The revised 2012 MPFS for claims with dates of service Jan. 1, 2012, through Feb. 29, 2012 is now available. MACs are now posting the new rates on their websites. Changes to physician work relative value units (RVUs) can be found in the attachment associated with CMS Change Request (CR) 7737. Changes to practice expense RVUs are in Addendum B and C of the 2012 MPFS Final Rule Correction Notice.

TPTCCA also extends through Feb. 29, 2012:


  • The existing 1.0 floor on the physician work geographic practice cost index
  • The five percent increase in payments for certain mental health services
  • For hospital outpatient payments, a special exception wage index
  • The exceptions process for outpatient therapy caps
  • The moratorium on independent laboratory billing for the technical component (TC) of physician pathology services furnished to hospital patients
  • Ambulance add-on payments
  • The Outpatient Hold Harmless provision
  • The 2011 payment rate for bone mass measurement

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