CMS Forced to Begin Processing Medicare Payment Claims at Reduced Rate

CMS has instructed its Medicare contractors to start processing claims for physician payments at a 21.3 percent reduced rate after Congress failed to pass legislation blocking a Medicare payment reduction that took effect as called for by the sustainable growth rate formula.

The 21.3 percent payment reduction technically took effect on June 1, but CMS told its contractors to hold off processing claims for the first 17 days of June to avoid having to pay physicians at the greatly reduced rate, particularly as it was likely Congress would act to stop the reduction a few days later.

Although the Senate did reach an agreement on a payment patch on June 18, CMS was forced by law to instruct its contractors to start processing claims with services dates of June 1 or later at the reduced 21.3 percent rate starting on June 18. The Senate measure would provide a 2.2 percent increase in the Medicare payment rate until Nov. 30. However, it requires House approval before it can take effect, and the House cannot take it up until next week.

"CMS today directed contractors to lift the hold and begin processing June 1 and later MPFS (Medicare physician fee schedule) claims under the law's negative update requirement," said correspondence that CMS sent to contractors and other stakeholders on June 18. "Held claims will be released and processed on a flow basis, first-in/first-out."

CMS also said it is hopeful that Congress will take action to counteract the negative update, and it will continue to monitor that activity. "If Congress changes the negative update currently in effect, CMS is prepared to act expeditiously to make the appropriate changes to Medicare claims processing systems," said the correspondence.

The House passed a bill in late May that would have provided a 2.2 percent increase in the Medicare payment rate for the rest of 2010 and a 1 percent increase in 2011. The Senate struggled to find offsets in the budget to pay for a similar Medicare payment patch but, ultimately, could only agree on a 2.2 percent physician payment update until Nov. 30, setting up a House vote on the measure next week.

But Congress' action comes too late to stop the 21.3 percent reduction from actually taking effect.

"By its inaction, Congress has deserted America's elderly and disabled patients, as well as our military service members and families," said AAFP President Lori Heim, M.D., of Vass, N.C., in a prepared statement. "They have sent family physicians and their medical counterparts back to 1994 compensation levels."

Heim described the current situation as "intolerable," saying that "Congress has broken the trust with physicians and 44 million elderly and disabled Americans, and more than 1.45 million members of the military and their families. This is very likely to have direct and significant impact on health care access for these patients."

Heim also noted that the "AAFP is providing resources (1-page Word file; About Downloading) to help family physicians reach out to patients and let them know about the impact these cuts will have on access to care."

"We are asking for their help in telling Congress to immediately and retroactively nullify this cut and implement a permanent, sustainable and equitable Medicare payment system," said Heim.