Medicare pay freeze ensured by new law

April 1, 2010

In February, President Obama signed into law a measure to raise the federal debt limit by $1.9 trillion to $14.3 trillion, enabling the government to keep borrowing to cover operations into 2011.

On February 12, President Obama signed into law a measure to raise the federal debt limit by $1.9 trillion to $14.3 trillion, enabling the government to keep borrowing to cover operations into early 2011. The Senate passed the debt limit increase in mid-January, and the House of Representatives soon followed.1

The measure also implements statutory "pay-as-you-go" provisions under which the cost of tax cuts or expansions of entitlement programs such as Medicare must be offset with new taxes or spending cuts to avoid adding to the deficit. In a partial exemption to these provisions, up to $82 billion of scheduled physician rate cuts can be reversed without finding offsets. This corresponds to a 5-year freeze of current Medicare rates. Passage of separate legislation was required to reverse the 21.1% cut in Medicare physician payment that went into effect on March 1.

However, late on March 2, the Temporary Extension Act of 2010 passed by a 78-19 vote in the Senate and was immediately signed by the president.2 The bill, which cleared the House on February 25, postpones the across-the-board physician pay cut and freezes current rates through March 31. Because the Centers for Medicare & Medicaid Services (CMS) plans to hold March physician claims for 10 business days to allow the Senate to approve a patch retroactive to March 1, physicians are unlikely to receive payment with the 21% reduction applied.

1. Silva C. Medicare pay freeze closer to passage in Congress. American Medical News. February 16, 2010. http://www.ama-assn.org/amednews/2010/02/15/gvse0216.htm. Accessed March 11, 2010.

2. Glendenning D. Medicare physician pay cut delayed as Senate clears logjam. American Medical News. March 8, 2010. http://www.ama-assn.org/amednews/2010/03/08/gvl10308.htm. Accessed March 10, 2010.