The cut in Medicare payments was required under the sustainable growth rate (SGR) formula, which links Medicare reimbursement rates to increases in the country's gross domestic product. The formula required a 27.4% reimbursement cut unless Congress acted to prevent it before the end of the year.

Language postponing the SGR fix was included in broader legislation that also extended a payroll tax cut set to expire at the beginning of the year, and the bill had become part of a game of political brinksmanship between the Obama administration and Republicans in the House of Representatives. The House GOP wanted the tax cut extended for a full year, but Obama and the Senate preferred a two-month extension that would enable Congress to adjourn for the holidays and then revisit the issue in 2012.

Under heavy political pressure, House Republicans blinked, and the bill was passed on December 22. Obama signed the legislation the next day.