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Federal budget deal will extend Medicare sequestration cuts one more year



October 29, 2015
Area(s) of Interest: Advocacy Commercial Payors Payor Issues and Reimbursement 

On Wednesday, the U.S. House of Representatives passed a budget deal that will keep the government running until after the 2016 presidential election. The deal extends the federal government's ability to borrow money through March 2017 and allows military and domestic spending to exceed so-called sequestration caps by $80 billion over the next two years.


Unfortunately, the deal was partially funded by extending the 2 percent sequestration cuts for all Medicare providers, including physicians and hospitals, one more year through 2025.


The only upside in this budget agreement is a provision that the California Medical Association (CMA) has been advocating for many years – "site neutral payments." Currently, Medicare rates for services provided in hospital outpatient departments  are paid at a higher rate than if the service was provided in a physician’s office.  For example, a physician office visit is reimbursed by Medicare at $72, when that same service provided in an outpatient hospital setting is reimbursed at $123. 


Under the budget deal, services provided in outpatient hospital departments more than 250 yards away from the hospital campus would be paid according to either the Medicare physician fee schedule or the schedule for ambulatory surgery centers, depending on the services provided. This provision will cut  hospital payments by $9.3 billion over 10 years and should dampen moves hospitals are currently making to acquire physician practices. The provision would take effect in 2017 and will not apply to hospital-employed physicians who were working off campus before the law was enacted.


The agreement also prevents the large Medicare premium increase projected for 30 percent of Medicare seniors in 2016. The change will be financed by a $3 surcharge on higher income seniors.


CMA sent a message of opposition about the extension of the sequestration cut extension to the California Congressional delegation. This was also one of the messages that the multi-state medical association coalition delivered to Congress during their meetings in Washington, D.C., last week. 


The U.S. Senate is expected to vote on this budget deal in the next couple of days.


Contact: Elizabeth McNeil, (800) 786-4262 or emcneil@cmadocs.org.

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