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2021 Policy background information

Medicare physician payment


To help maintain stability for dermatology practices as the country continues to rebuild from the COVID-19 public health emergency, the American Academy of Dermatology Association (AADA) urges Congress to take action to stop pending Medicare payment cuts impacting patients’ access to care and mitigate the financial distress facing dermatology practices.

Message to the Hill

Once again, the Centers for Medicare & Medicaid Service’s (CMS) proposed Medicare Physician Fee Schedule (MPFS) rule for Calendar Year 2022 (CY 22) offsets the increases to evaluation and management (E/M) services with cuts to other sections of the fee schedule to maintain budget neutrality. Late last year, Congress took action to provide relief from the E/M related cuts in 2021 by providing a one-year increase of 3.75% to Medicare physician payment to help offset what would have been drastic cuts. While the AADA appreciates this relief, physicians are again facing significant Medicare payment reductions in reimbursement for their services in 2022.

In addition, the 2% reduction to Medicare payments due to the sequester is scheduled to go back into effect on January 1, 2022.

Finally, due to budget rules created by the Pay-As-You-Go (PAYGO) Act of 2010, unless Congress acts, the implications of using the reconciliation process to enact the American Rescue Plan Act of 2021 will result another 4% cut to Medicare payments.

If all three of these cuts were to go into effect, dermatologists would see their reimbursement for caring for Medicare patients cut by up to 10% or more overall.

Ask

Support legislation to:

  • Maintain the 3.75% increase to the Medicare Physician Fee Schedule (MPFS) conversion factor through at least calendar years 2022 and 2023 to ensure financial stability for physician practices that are still struggling through the effects of the pandemic.

  • Extend the Medicare sequester moratorium to avert the additional 2% reduction in Medicare payments.

  • Waive the PAYGO requirements connected to the American Rescue Plan Act that would result in an added 4% cut to Medicare payments.

U.S. House of Representatives only

Ask your Representative to oppose these Medicare physician payment cuts and sign onto a letter* being circulated by Reps. Ami Bera, MD (D-CA) and Larry Bucshon, MD (R-IN) that asks House Leadership to prioritize aversion of these cuts. (See link to letter on Overview of Asks tab.)

*In Congress, members of the House and/or Senate often write letters to the leaders of the parties, who decide what legislation is voted on, asking them to prioritize certain issues or bills. To add weight to their request they solicit signers from their colleagues. This is commonly referred to as a “dear colleague letter” that accompanies the solicitation. Our role is to encourage members of Congress to join, because we have an interest in promoting the outcome.

Background

Evaluation and Management Code Policy Implementation
Several years ago, the Centers for Medicare and Medicaid Services (CMS) proposed broad changes to the Medicare Physician Fee Schedule (MPFS) to reflect current clinical practice as it relates to evaluation and management (E/M) services that are provided in physician offices. Current law requires that such changes to the MPFS be enacted in a budget neutral manner that results in significant cuts to procedural and other services performed by specialists and other health care providers. However, after Congress successfully acted to delay the proposed E/M changes for a year, CMS again moved ahead to implement the E/M code changes.

Last December, physician specialties, including the AADA, and other non-physician health care providers were successful in persuading Congress to hold physicians harmless due to implementation of the E/M changes for Calendar Year (CY) 2021. Congress provided an additional 3.75% temporary funding increase in the Consolidated Appropriations Act of 2021 to the MPFS conversation factor, the key component of the formula that determines Medicare reimbursements to physicians for providing services to beneficiaries in the Medicare program. This helped alleviate cuts associated with budget neutrality requirements. Under current law, CMS cannot increase or decrease expenditures for the value of physician payment for a particular service in the MPFS beyond an overall amount of $20 million without identifying an offset in payments to another service. This is known as budget neutrality.

To meet the budget neutrality requirements that are required under the MPFS, the expected increased payments for E/M visits in 2022 will be offset by a decrease in the conversion factor of approximately 3.75%. This decrease will translate into significant cuts in Medicare reimbursement for dermatology practices and could undermine the financial stability of practices and their ability to serve their patients.

The physician community is urging Congress to maintain the 3.75% increase to the conversion factor through at least calendar years 2022 and 2023 to ensure financial stability for physician practices that are still struggling through the effects of the pandemic.

It is worth noting that there will also be a statutory freeze in annual MPFS updates until 2026 stemming from the Medicare Access and Chip Reauthorization Act (MACRA).

Sequestration
The sequester was enacted as part of the Budget Control Act of 2011, which included automatic, across-the-board cuts to Medicare payments that was intended to reduce federal spending over ten years. It was originally intended as an incentive for the so-called Super Committee convened that year to design an alternative package to achieve $1.2 trillion in budget savings. Since Congress has not achieved those saving through the regular budget process, the 2% cut to the Medicare program has become a regular occurrence for providers – essentially setting Medicare payments at 98% of what would otherwise be the norm.

As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Consolidated Appropriations Act, 2021 and then H.R. 1868, Congress acted three times to extend relief to health care providers by suspending the Medicare sequester through the end of 2021, but also extending the life of the budgetary offsets through 2030. Congress will now have to act a fourth time in two years to maintain the sequester moratorium.

Pay-As-You-Go
With passage of the American Rescue Plan Act of 2021, physicians face another 4% cut to Medicare payments on top of the 2% sequester and cuts to comply with budget neutrality with implementation of the E/M code policy changes. This 4% cut is due to budget rules created by the Pay-As-You-Go (PAYGO) Act of 2010, which requires that new legislation impacting tax and spending on entitlement programs not increase the budget deficit. The PAYGO offset of the American Rescue Plan Act can be waived through congressional action. In March, the House passed an initial version of H.R. 1868, which would have both extended the sequester moratorium and waived the PAYGO rules, to avert both cuts; however, the Senate stripped the PAYGO section and amended H.R. 1868 to extend the sequester moratorium. Shortly thereafter, the House approved the amended bill, and President Biden signed H.R. 1868 into law on April 14.

More information

The AADA works to ensure physicians are positioned to succeed under Medicare reimbursement rules and are not unduly burdened by regulations. Learn more.


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