December 15, 2021

It seems to happen every year: the plunging sword of Damocles is avoided at the last minute.  In the present context, the threat that had been hanging over the head of every Medicare provider was a set of substantial cuts in payment tied to patient services.  Sequestration and cuts to the Medicare physician fee schedule (PFS) conversion factors (CFs) have loomed large over the last few years as consistent threats to provider paychecks, only to be resolved—to one extent or another—before the cuts were set to kick in.  As usual, the catalyst for the 2022 version of this just-in-time deliverance was the United States Congress. 

Overview and Details

On Dec. 7, the U.S. House of Representatives passed legislation that offsets most of the proposed cut to the 2022 Medicare Physician Fee Schedule’s CF and delays additional reductions due to sequestration and Pay-as-You-Go legislation.  The U.S. Senate passed the bill (known as the Protect Medicare and American Farmers from Sequester Act) on December 9.  It was signed by the president on the following day.  Without this intervention by the legislative and executive branches, many healthcare professionals were facing reimbursement reductions on the order of eight to 10 percent for the coming year.

Specifically, the Act extends the moratorium on the 2 percent Medicare sequester cut until April 1, 2022.  It then reduces the cut to 1 percent from April 1 through June 30, 2022.  In addition, the bill would quash the 4 percent statutory Pay-As-You-Go payment cut from taking effect next year.  Finally, the legislative package addresses the reduction in the 2022 CF set by the PFS Final Rule (FR).  Based on a review of several news outlets, it is uncertain what the new PFS CF will ultimately be set at, though it will clearly be better than what the 2022 FR had published.  Here is a representative statement regarding what the new legislation would mean for the 2022 PFS CF: “Increase payments on the Medicare Physician Fee Schedule by 3% in 2022. The amount is 0.75% less than the 3.75% increase the fee schedule received for 2021.” 

History of Postponements

By way of background, the Budget Control Act of 2011 required mandatory across-the-board reductions in federal spending, known as “sequestration.”  This meant that Medicare fee-for-service (FFS) claims with dates of service or dates of discharge on/after April 1, 2013, would incur a 2 percent reduction in reimbursement for each year the sequestration was in place.  Claims for durable medical equipment (DME), prosthetics, orthotics, and supplies, including claims under the DME Competitive Bidding Program, were also to be reduced by 2 percent.

The claims payment adjustment was meant to be applied to all claims after determining coinsurance, any applicable deductible, and any applicable Medicare Secondary Payment adjustments.  That is, beneficiary payments for deductibles and coinsurance in connection with assigned claims are not subject to the sequestration reduction.  In terms of Part A claims, the 2 percent reduction is applied to Periodic Interim Payments (PIP), Critical Access Hospital (CAH) and Cancer Hospital interim payments, and pass-through payments for Graduate Medical Education, Organ Acquisition, and Medicare Bad Debts.

The original legislation implementing sequestration was meant to apply the cuts from 2013 to 2021.  Over the years, however, the cuts required by sequestration have been postponed—often at the end of the year.  For example, in 2020, Congress postponed the implementation of sequestration for 2021 due to the financial impact of COVID.  Because of these postponements—including this latest one that is applicable for at least part of next year–sequestration will continue to hang over health provider’s heads until 2030 or 2031.  Of course, Congress may continue its recent practice of postponing or reducing (or ultimately eliminating) these cuts as new deadlines approach.

Representative Reactions

In a statement shared with the media, AHA President and CEO Rick Pollack said the following:

The AHA appreciates that the Senate, on a bipartisan basis, has joined the House in halting harmful and imminent Medicare cuts to hospitals and physicians. Eliminating a 2% Medicare reduction until April 2022 and then lowering the cut to 1% for an additional three months, and stopping the 4% Statutory Pay-As-You-Go (PAYGO) Medicare cuts from taking effect next year, removes the uncertainty these cuts were creating for our nation’s caregivers. Additionally, we are pleased that Congress lowered reductions to payments to physicians, delayed harmful cuts to clinical laboratories, and pushed back implementation of the Radiation Oncology model.

We will continue to work with Congress and the Administration to ensure that all hospitals, health systems and caregivers have the resources and support they need to continue battling COVID-19 while also providing the other essential care and services their patients and communities depend on each day.

We can take comfort that we have been spared once more as it pertains to potentially draconian cuts in Medicare reimbursement—at least for the time being.  If you have questions about this topic, please feel free to reach out to us at info@miramedgs.com.