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Budget Neutrality

November 18, 2020

Budget Neutrality
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QUESTIONS: Why is there a proposed decrease in my Medicare payments in 2021? We scored 100 in MIPS this year. Where is my 7%?

ANSWER: Budget Neutrality!

The 2021 Medicare Physician Fee Schedule (MPFS) Proposed Rule was released on August 3, 2020. Included in the Rule are updates to Part B reimbursement policies and the Quality Payment Program (QPP). One of the frustrations that many providers have with the Rule is the policy requiring budget neutrality. 

We have seen it for years in the QPP. MIPS positive payment adjustments, by regulation, could have been 4, 5, 7 and 9%. However, the maximum adjustment for each of the previous years has been much less than that. In fact, each year, the maximum positive payment adjustment has been less than the 2% sequestration adjustment! The positive incentives did not come close to the possible adjustments proposed in the MACRA legislation. 

The reason for the discrepancy is budget neutrality. If there are incentives or increases in expenditures in one area of the program, off-setting decreases or penalties must be made in another area. The net effect of the adjustments must be neutral on the overall program budget. In the MIPS program, the positive payment adjustments are limited by the funds available from the penalties assessed to providers who didn’t meet the minimum score. 

As it applies to the MPFS, the increase in E/M services Relative Value Units will result in higher payments for those services. To ensure the program remains within budget, a negative adjustment will have to be applied to the other services covered under the MPFS. As a result, the payments for those procedures and other non-E/M services will be decreased.

Table 90 of the Proposed Rule estimates the impact by specialty. Some of the beneficiaries of the policy are providers in endocrinology, rheumatology, hematology and family practice. On the other end of the spectrum, radiology, anesthesiology, cardiac surgery, interventional radiology and pathology could potentially see significant reductions in their reimbursement.

MGMA, the AMA and many of the specialty societies are advocating for Congress to lift the budget neutrality provision. In fact, the American College of Surgeons (ACS) and 11 other surgical professional associations formed the Surgical Care Coalition. In an ACS publication to its members, the organization is asking providers to contact their senators and representatives in Congress and ask them to waive budget neutrality this year.

In light of the COVID-19 pandemic and the significant financial pressure many healthcare providers are under, the additional decrease in reimbursement for so many may be detrimental.


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