Medicare Payment Advisory Panel's Recommendations

On October 6, 2011, Medicare Payment Advisory Commission voted 15-2 to abolish the Medicare pay mechanism that had been in place since 1997. Instead of volume of care, the advisory panel emphasized on quality of care. Under the existing law, Medicare reimbursement fees to doctors will drop by 29.5% come January 1, 2012 because of growth in medical expenses and deferred pay cuts supposed to take hold every year since 2003. Repealing the existing fee structures, called the Sustainable Growth Rate, will cost $300 billion over 10 years. That will be offset by:

(I) One-third savings from

(A) Freezing general practitioners' fees

(B) Cutting specialists' fees by 5.9% for three years followed by fee-freeze for the successive seven years


(II) $220 billion savings from higher co-pay and premium.

The panel report, which is issued on October 6, 2011 and preliminary, is critical to both sustainable growth rate and fee-for-service.