Obama’s 2012 Budget Postpones SGR Update Until Late 2013

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image President Obama’s proposed $3.7 trillion budget for fiscal 2012 calls for a two-year postponement of the scheduled 25% cut in the Medicare Physician Fee Schedule (MPFS) under the sustainable growth rate (SGR) formula, according to the U.S. Office of Management and Budget. U.S. Office of Management and Budget. Announced on Monday, the budget would put off until September of 2013 a cut that would otherwise be made off Medicaid reimbursements beginning in 2012.

The 25% cut is mandated by the SGR formula, which links physician reimbursement rates to increases in the gross domestic product (GDP). Spending on physician services has outpaced increases in the GDP; hence, the formula has called for cuts in reimbursements each year over most of the past decade. Congress has always voted to push those cuts down the road.

Obama called the two-year SGR fix a down payment toward a permanent fix, noting in his proposal that his Administration “is committed to working with the Congress to achieve permanent, fiscally responsible reform and to give physicians incentives to improve quality and efficiency, while providing them with predictable payments for the care they furnish to Medicare beneficiaries.”

The two-year physician payment fix would cost $54 billion, and the cuts to pay for the SGR fix would come partially from what President Obama, in a Monday morning address on the budget from a Baltimore middle school, called wasteful health spending.

However, the proposal drew criticism from state officials, pharmaceutical manufacturers, and home healthcare dealers due to limits on the amount states can tax health care providers, steps to increase the use of generic drugs, and prepayment reviews for the sales of power wheelchairs, according to a story by Kaiser Health News.

The 2012 budget outline also proposes a total of $892 billion to fund the Department of Health and Human Services (HHS) next year—just slightly higher than 2010 levels. Overall government spending stipulated in the budget would decrease by 2.7% from the $3.8 trillion proposed by the president for 2011. The plan calls for reducing the federal deficit by more than $1 trillion over a decade, bring the nation’s total deficit to about 3% of the overall economy. In a video on the White House Web site, Jack Lew, director of the Office of Management and Budget (OMB), called such a deficit “sustainable”.