The Fiscal Cliff Deal: Medicare Cuts for Physicians Averted

Almost 24 hours past the midnight, December 31, 2012 deadline, Congress cut a last-minute deal to avoid the impending “fiscal cliff” and the potentially devastating economic circumstances which would result from planned tax increases and spending cuts scheduled to take effect. The deal isn’t a fix-all, but more a band-aid to buy leaders more time to negotiate longer-term solutions to some of the nation’s most worrisome problems.

Physicians temporarily saved from massive cuts

The deal will have major ramifications on the healthcare system, affecting many seniors in a number of ways. One of the biggest potential crises, a Medicare pay cut to physicians, has been avoided but at the cost of cutting payments to other providers — including hospitals. The scheduled cuts would have cut physician payments by 27 percent, causing many doctors to say they’d have to stop seeing Medicare recipients.

Image by Yuya Tamai on Flickr

A major change to the way Social Security cost-of-living increases has also been avoided, at least for now. Some leaders were pushing to adjust the calculation to a chained-CPI model, which would have reduced Social Security payments to seniors over the long term.

Medicare payment cuts hit hospitals

Of course, the major victory for physicians doesn’t come without a cost: Those $30 billion in funds will be covered by cuts to hospitals, a move providers aren’t thrilled about. Over 10 years, $10.5 billion will be saved by reducing Medicare base payment increases for inpatient care. An additional $4.2 billion over the same time period will be saved by reducing the Medicaid Disproportionate Share Hospital payments, according to Healthcare Finance News. Finally, payments for end-stage renal disease treatments will be re-priced for a potential savings of $4.9 billion over the next decade.

Rich Umbdenstock, president and CEO American Hospital Association, says these cuts will impact hospitals’ ability to provide care for senior citizens. Jeremy Lazarus, MD, president of the American Medical Association, points out that the Medicare program is unreliable due to the current practice of enacting temporary fixes each time current legislature is set to expire, and says the cuts will hinder Medicare’s progress in developing more effective delivery models for the benefit of seniors.

What’s to come?

Many Republican leaders are left frustrated after this final-hour agreement, regretful that the bill does not include any spending cuts. Republican leaders initially pushed hard for major spending cuts which would help control the federal deficit. In the end, they chose to vote on the bill as-is to avoid setting negotiations in motion again which could have significantly stalled progress and sent the nation into a severe financial crisis if middle-class tax cuts were allowed to expire, unemployment benefits halted for millions of Americans and physician payment cuts went into effect.

By March, Congress will be faced with making the decision to raise the debt ceiling to cover additional costs the current deal will add which aren’t offset by savings elsewhere, such as the $30 billion unemployment extension. It’s likely that a push for cost-cutting measures to Medicare, Medicaid and Social Security will be revisited at that time.


Senior Advisor

We've Found 268 Facilities Near 98155.

Request a free consultation:

  • Get personalized guidance from a dedicated local advisor
  • Save time with an easy-to-understand breakdown of services and fees.
  • Our service is 100% free to use - no hidden costs.

By submitting this form, you agree to's Privacy Policy, Terms of Use, and Agreement to be Contacted by Telephone.

Thank You!

A Family Advisor will contact you to help you do your search for you!

Our service is completely free to you.

Speak to an Advisor Now

Tap to Call Us 1-800-748-4024