Medicare Payment and Reimbursement

A bill to mitigate scheduled Medicare payment cuts of $14 billion is ready to go in Congress

December 9, 2021 11:37 pm

Dec. 9 update: The bill passed the House on Dec. 7 and passed the Senate on Dec. 9 after 14 Senate Republicans voted to forgo a potential filibuster. Following President Joe Biden’s signature, hospitals won’t face any reduction in their Medicare payments until the phase-in of the sequester begins in April. Total cuts for 2022 will be about $2.9 billion, down from an estimated $14.1 billion if the legislation hadn’t been enacted. Physicians also will face a far less substantial payment decrease. See the article below for details on the provisions.

  • The House of Representatives is set to vote on a bill that would cancel a large share of 2022 Medicare payment cuts, which have been projected to total $14.1 billion for hospitals.
  • Physicians have an even greater financial stake in passage of the bill.
  • Passage in the House seems likely, and Senate Minority Leader Mitch McConnell said he thinks it will pass his chamber as well.

Congress took a big step Tuesday, Dec. 7 toward providing a large measure of relief from the 6% Medicare fee-for-service payment reduction that looms for hospitals in 2022.

A bill called the Protecting Medicare and American Farmers from Sequester Cuts Act was drafted and prepared for a vote in the House, where it was expected to pass Tuesday night. The bill then would go to the Senate, where Republicans blocked similar legislation in March, citing deficit-related concerns.

The fact that the cuts are less than a month away from kicking in may have swayed enough Republican senators to allow passage. Minority Leader Mitch McConnell (R-Ky.) told reporters he thought at least 10 members of his caucus would support the bill, which also includes a provision allowing Democrats to subsequently raise the debt ceiling with a majority vote. If McConnell’s prediction comes true, the bill’s passage would be secured assuming every Democrat votes in favor.

Hospital advocates have said the 6% reduction — which translates to $14.1 billion over a year, according to figures cited in a recent letter from hospital associations to Congress — is especially untenable amid the financial crunch posed by the COVID-19 pandemic.

“Additional Medicare reductions to providers are not sustainable and put our members’ ability to care for their patients at risk,” the associations wrote in the letter. 

The bill’s impact on 2022 Medicare payments

The bill would postpone the 4% Medicare cut stemming from a PAYGO clause in the March 2021 COVID-19 relief legislation. The cut would be deferred to 2023, at which point Congress presumably would consider delaying it again, especially if the pandemic is still a factor.

The legislation also would ease the scheduled restoration of the 2% Medicare sequester, which had been waived near the start of the public health emergency. The moratorium on the sequester would remain in place through March, with the sequester kicking in at a reduced 1% rate from April through June before increasing to 2% for the second half of the year.

With the change, the 2022 reduction in Medicare payments stemming from the sequester would be about $2.9 billion, down from an estimated $4.7 billion if the full sequester were in place all year. In turn, the sequester would be scheduled to increase in 2030 (to 2.25% for the first half of the year and 3% for the second half).

The American Hospital Association lauded the bill, saying the provisions ensure “providers on the front lines of the fight against COVID-19 will not face imminent financial jeopardy as they continue to care for patients and communities.”

Even more at stake for physicians

Physicians face almost a 10% payment cut in 2022, with a 3.75% reduction in the Medicare Physician Fee Schedule on top of the same cuts that await hospitals in the absence of legislation. That cut has been pending since the 2021 fee schedule was increased by the same amount as an accommodation during the public health emergency.

The pending bill would change the scheduled MPFS decrease to 0.75% for 2022.

The looming cuts are all the more challenging for physicians in the wake of vastly reduced healthcare spending amid the pandemic. The American Medical Association recently released a report that found a decline of 14% in 2020 Medicare spending on physician services relative to pre-pandemic expectations. That percentage translated to $13.9 billion.

In an October press event hosted by the American Medical Group Association (AMGA), leaders of several medical groups spoke about the toll the upcoming cuts would take on their operations. Among respondents to an AMGA survey, 43% said they would freeze or delay hiring and 37% expected to eliminate services if the cuts went through as scheduled.

“The thought of having to make very difficult decisions like we did during COVID is hard to swallow,” Carol Brockmiller, CEO of Quincy Medical Group in Illinois, said during the press event. “It’s hard to plan for.”

The bill also would delay the start of the Radiation Oncology Model, a mandatory value-based payment model for providers in specified markets, from Jan. 1, 2022 to Jan. 1, 2023. The launch date had been scheduled for January 2021 before getting postponed a year ago.


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