The end of the 2007 Congressional session included a battle about an automatic 10.1% reduction in Medicare reimbursements to physicians scheduled to start January 1st. The resolution to this battle was a temporary legislative fix with a 0.5% increase. However, that fix was only for 6 months, so on July 1st, reimbursements are scheduled to drop by 10.6% from what they are now – the original 10.1% plus the 0.5% increase.

While that will certainly be a focus for Congress this spring, there is another, bigger Medicare fiscal battle likely to be fought because of a provision of the 2003 Medicare Modernization Act (MMA). Title 8 of the MMA includes a trigger mechanism that requires the President to submit legislation to Congress to reduce Medicare spending, if the Medicare Trustees project in two consecutive years, that – in any of the 7 upcoming years – more than 45% of total Medicare spending will come from “general revenues,” (essentially tax dollars as opposed to funds from the Medicare Trust Funds which come mostly from Part A payroll deductions and Part B premiums).

And since the 2007 Medicare Trustees report was the second in a row to make that projection, it triggered a so-called “Medicare funding warning,” which obligates the President to send cost containment legislation to Congress to eliminate this excess general revenue spending by Medicare. The time frame for this legislation is important too. The President is to submit the legislation within 15 days of submitting his budget proposal (which was on Monday, February 4th), so this gives him a deadline of Tuesday, February 19th. And the Congressional Committees – acting under some expedited rules included in the MMA – are supposed to act on the proposed legislation (or their own version which accomplishes the same reduction in Medicare spending of “general revenues”) by June 30th — the same day that the physicians’ Medicare reimbursement reprieve expires.

Technical Note: The MMA also has a provisions to push/pull the legislation out of the Committees for consideration by the House of Representatives and the Senate if the Committees fail to act by their June 30th deadline.

The February 2nd issue of the National Journal has an interesting article (“Frozen Trigger”) about the MMA provisions and some options for how legislation could be crafted to address Medicare’s “excess” projected general revenue spending, e.g. specific spending/benefit reductions versus across the board cuts of x% However, the article doesn’t address the timing confluence of the expiring physician payment legislation with the required Committee actions under the trigger – or the fact that in a Presidential election year, the entire legislative calendar gets compressed, so what Congress might “normally” do in September, will require action in June if it is to be passed into law.

If this seems like a complex situation, it is. And the other set of wrinkles in this process is that while the trigger requires actions by the President and the Congress, they can find ways to not act. For example, the President could choose to submit bare-bones legislation (or ignore the requirement completely – or claim that it is already contained within his January 4th budget proposal). Similarly, there is no penalty if Congress does not pass anything to eliminate Medicare’s projected “excess” general revenue spending. So they could propose and debate legislation, and pass nothing.  Or act on legislation that falls short of bringing Medicare’s projected general revenue spending down to 45%

This year is already setting political precedents and causing political pundits to double back on their best guesses. What do you think will happen with these Medicare fiscal issues?