Impact of keeping current doctor pay rates

Maintaining the Medicare program’s current payment rates to physicians and eliminating the expected automatic cuts to non-defense spending early next year would increase federal spending by about $40 billion in 2013 and by $61 billion the following year, the nonpartisan Congressional Budget Office projected Thursday.

As lawmakers prepare for intense deficit-reduction negotiations to solve the fiscal Cliff in Washington, the CBO released an analysis that details the consequences of not addressing the fiscal cliff, which describes a series of looming tax increases and spending cuts designed to reduce the nation’s federal budget deficit.

The new projections add more detail to the CBO’s estimates in August, which indicated that efforts to reduce the federal deficit would cause the economy to contract but also guide the country on a more fiscally sound path. Conversely, if these measures are not taken, the economy would grow in the short term, but the nation’s debt would expand over the long term.

In this most recent report, the CBO examines automatic reductions in defense spending; automatic cuts in nondefense spending and reductions in Medicare’s payment rates to doctors; the extension of certain tax cuts scheduled to expire; details about the alternative minimum tax; and the extension of the payroll tax cut and emergency unemployment benefits.

CBO analysts noted the anticipated 27% cut in physician fees scheduled to take place after Dec. 31. “If, instead, lawmakers override these scheduled reductions – as they have every year since 2003 – spending on Medicare would be greater than the amounts projected in CBO’s baseline,” according to the report. “For example, if payment rates stayed as they are now, outlays for Medicare (net of premiums) would be $10 billion higher in fiscal year 2013 and $16 billion higher in fiscal year than they are in CBO’s current-law baseline.”

Paul King and Charlotte Hildebrandt
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