"The plan [builds] on the Affordable Care Act to strengthen Medicare and Medicaid by reducing wasteful spending and erroneous payments, and supporting reforms that boost the quality of care," the White House said in a statement.
The cuts would come from updates to Medicare payments to "more appropriately account" for utilization of advanced imaging, as well as mandatory prior authorization. The president's proposal is part of ongoing negotiations on deficit reduction mandated by the Budget Control Act of 2011, which are to be handled by a special 12-member congressional "super committee." The committee must find an additional $1.5 trillion in federal savings to allow for another debt ceiling increase by December 23, or automatic cuts in both discretionary and mandatory programs will be triggered.
Medicare spending for advanced diagnostic imaging services paid for under the Medicare Physician Fee Schedule has grown dramatically in recent years due to an increase in the number and intensity of those services, the proposal stated. According to the Medicare Payment Advisory Commission (MedPAC), this volume growth may signify these services are mispriced.
What's the bottom line? Beginning in 2013, the president's proposal would implement a "payment adjustment" for advanced imaging equipment to account for higher levels of utilization, which will save $400 million over 10 years.
There's more: Also in 2013, the president's proposal would mandate prior authorization for the most expensive imaging services, to "ensure that these services are used as intended and protect the Medicare program and its beneficiaries from unwarranted use." Total savings would be $900 million over 10 years.
The proposal does not fix the sustainable growth rate (SGR) formula, which the U.S. Centers for Medicare and Medicaid Services (CMS) uses to set the conversion factor for the Medicare Physician Fee Schedule; the projected reduction to the fee schedule for 2012 is 29.5%, unless Congress manages to intervene.
In addition, the proposal would find $500 million in savings through penalties against those Medicare providers that fail to show meaningful use of electronic health records. The penalties would be credited to a special account beginning in 2020, and would be applied toward deficit reduction in 2021.