Today the House of Representatives overwhelmingly approved a bill (H.R. 4994) that averts a 25% Medicare physician fee schedule cut scheduled to take effect January 1, 2011 under the statutory “sustainable growth rate” formula (Congress had already approved legislation to provide a one-month fix through December 2010). The vote, which followed a unanimous Senate vote yesterday, sends the measure to the President, who has expressed his support for the legislation. In addition to extending current Medicare physician payment rates through the end of 2011, H.R. 4994 continues a variety of expiring Medicare provisions and makes other health policy changes, funded primarily through a change in limits on recoveries of excessive tax credits provided to subsidize insurance premiums under the Affordable Care Act (ACA). Other highlights of the legislation include:

• Extensions of: hospital geographic reclassifications authorized under section 508 of the Medicare Modernization Act, the Medicare physician fee schedule work geographic adjustment floor, the outpatient therapy services exception process, the authority for independent laboratories to receive direct payments for the technical component of certain pathology services, ambulance service and physician fee schedule mental health add-on payments, the outpatient hold harmless provision, Medicare reasonable costs payments for certain clinical diagnostic laboratory tests furnished by certain rural hospitals, the qualifying individual program, the Transitional Medical Assistance program, and the Special Diabetes Programs.
• Implementation on October 1, 2010 of version four of the Resource Utilization Groups (RUG IV) case mix system for purposes of the Medicare skilled nursing facility prospective payment system.
• Clarification that residency positions that are being shared between teaching hospitals under an “affiliation agreement” may not be redistributed to other hospitals.
• Inclusion of orphan drugs in the definition of “covered outpatient drugs” with respect to children’s hospitals under the 340B drug discount program.
• Various technical corrections to Medicaid and CHIP relating to exclusion from participation, children’s income eligibility levels, payment error rate measurement, coverage of children of state employees, and payment for electronic health records.
• A $275 million reduction in the Medicare Improvement Fund over 10 years.
• $19 billion in savings by revising the limits on recoveries of tax credits under the ACA. Currently, if an individual’s income actually is higher than the amount that was used to calculate advanced premium tax credits, there is a limit on how much of the excessive credits certain low-income individuals and families must return to the government. The legislation replaces these limits with a scaled repayment structure.

As noted, this is the second time in a month that Congress has considered Medicare physician reimbursement. On November 30, 2010, President Obama signed into law H.R. 5712, “The Physician Payment and Therapy Relief Act of 2010.” The law provided a one-month continuation of physician fee schedule rates, paid for by adopting – with modification – the Centers for Medicare & Medicaid Services’ (CMS) new multiple procedure payment reduction (MPPR) policy for outpatient therapy procedures included in the 2011 MPFS final rule. As approved by Congress, the provision applies a 20% (rather than 25% in the CMS rule) MPPR to the practice expense component of Medicare payment for the second and subsequent therapy services when multiple outpatient therapy services are furnished to a single patient by a single provider on the same day.