AMA: Medicare Sequester Threatens Physician Practice Viability

As Congress gets ready to pass another COVID-19 stimulus package this week, physicians are once again calling on lawmakers to consider extending the moratorium of the Medicare sequester in a bid to ensure physician practice viability.

In a letter to top lawmakers on Friday, the American Medical Association (AMA) urged Congress to address “imminent threats” to practice viability, including the expiration of the current moratorium on the 2 percent Medicare sequester on April 1 and new projections that the American Rescue Plan Act will trigger another 4 percent Medicare sequester.

The Senate passed the American Rescue Plan Act of 2021, a $1.9 trillion COVID-19 stimulus package, on March 6.

The additional Medicare sequester could result in physician payment cuts of up to $36 billion, AMA reported.

“We strongly oppose these arbitrary across-the-board Medicare cuts, and the predictably devasting impact they would have on many already distressed physician practices,” James L. Madara, MD, CEO and executive vice president of AMA, wrote in the letter.

The original 2 percent Medicare sequester has been used since the Budget Control Act of 2011, which automatically reduces Medicare reimbursement rates to prevent the US from hitting its debt ceiling.

However, Congress provided the healthcare industry with a reprieve from the cuts in 2020 because of the financial losses experienced by providers during the COVID-19 pandemic.

Medicare spending on physician services dropped by $9.4 billion, or 19 percent, in the first half of 2020 alone, an AMA analysis revealed last week. Spending fell by as much as 57 percent below expected pre-pandemic levels at the start of the pandemic before stabilizing around 12 percent below expected levels by summer.

Medicare spending on physician services—and therefore, physician revenue from Medicare—has seemingly recovered from historic lows, but evidence still points to physician practice viability challenges, including depressed revenues through the fall, AMA recently told lawmakers.

Therefore, the industry group is calling on Congress to prevent any Medicare reimbursement cuts that would result from the final passage of the American Rescue Plan Act, as well as pass H.R. 315, the Medicare Sequester COVID Moratorium Act—bipartisan legislation that would continue the current Medicare sequester moratorium for the duration of the COVID-19 public health emergency.

Congressman Brad Schneider (D-IL)  introduced the legislation at the start of the year to recognize the work providers have put in to combat COVID-19 while ensuring their practices stay viable despite heavy financial losses.

“COVID-19 cases continue to spike across the country. The dramatic growth in cases nationwide means continued stress on our frontline health providers. Our hospitals are reporting devastating staffing shortages, overloaded ICUs, and diminishing supplies of personal protective equipment. Our health care professionals report growing burnout and hospitals are experiencing decreased revenue as more are forced to stop elective procedures. Reinstating across the board cuts to our providers now would create unnecessary burdens at the worst possible time,” Congressman Schneider said in a Jan. 29 statement.

At the time, other leading provider industry groups including the AMA, Federation of American Hospitals (FAH), and American College of Physicians (ACP) were also asking Congress to extend the moratorium on the 2 percent Medicare sequester.

The American Hospital Association (AHA) also led a coalition of industry groups in October 2020 seeking an extension to the moratorium in 2021.

The recently passed American Rescue Plan Act, however, does not address the Medicare sequester moratorium much to the displeasure of provider industry groups.

“The AHA is disappointed that the bill does not deliver more overall funding for the Provider Relief Fund, which has been crucial in supplying hospitals, health systems and other providers with resources during the pandemic. We are also concerned that this bill does not include an extension of relief from Medicare sequester cuts, which will go back into effect at the beginning of next month, and also fails to provide loan forgiveness for Medicare accelerated payments for hospitals,” said Rick Pollack, AHA president and CEO, said in a statement this weekend.

The American Rescue Plan Act is headed back to the House for a vote expected on Tuesday.