A look at key parts of sweeping bill changing how Medicare pays doctors

The historic compromise legislation passed by the Senate this week will overhaul the way Medicare pays physicians and will create new systems to reward high-performing doctors.

The bill, which drew unusual bipartisan support in both chambers of Congress, also includes new funding for state insurance programs for children and for thousands of community health centers nationwide.

Key provisions of the legislation include:

-- No more “doc fix.” Gone is an arcane Medicare fee system that has been widely criticized almost since it was created in 1997. The system, known as the Sustainable Growth Rate formula, was designed to control Medicare spending by limiting annual increases in physicians’ reimbursements.


But year after year, as automatic cuts threatened to slash Medicare fees, physician groups warned of dire consequences for medical practices and patients, setting off a scramble in Congress to override the mandated limits. The annual dash became known as the “doc fix.”

This month, fees would have been cut 21% had Congress not acted.

-- A new payment system. Medicare physician fees will increase 0.5% annually over the next four years.

Potentially more important, the bill creates incentives starting in 2019 to pay physicians based on their performance, rewarding doctors who hit quality targets and whose patients get healthier while in effect penalizing those who do not.


-- More cost-sharing. To partially offset the $200-billion cost of the legislation, the bill places new, though limited, restrictions on popular insurance policies known as Medigap plans. Millions of seniors buy the policies to help pay for out-of-pocket medical expenses not covered by Medicare.

These plans would no longer be able to pay the $147 deductible for physician services, although they would still be able to cover the much higher $1,260 deductible for hospital care.

The bill also subjects the small number of seniors with individual incomes between $133,500 and $214,000 or joint incomes between $267,000 and $428,000 to higher Medicare Part B premiums. (Those with incomes beyond the upper limits would not see an increase.)

The offsets still do not fully cover the cost of the bill, which is projected to add more than $140 billion to the deficit over the next decade. Some Republicans objected to the deficit spending, but most nonetheless supported the bill.


-- Extended funding for children’s health insurance. The legislation extends federal funding until 2017 for the popular Children’s Health Insurance Program, which was set to expire this year.

CHIP, which was created in the late ’90s, is a state-run program that has provided coverage to millions of children from low- and moderate-income families who earn too much to qualify for traditional government Medicaid coverage.

Democrats had wanted to extend the funding until 2019, but compromised on two years.

-- Extends health center funding. Community health centers, which provide medical services to more than 23 million mostly low-income patients every year, will get two more years of funding under the bill.


Though abortion rights groups and some Democrats had objected to a provision that extends a long-standing prohibition on the use federal funding for abortion services, Democrats still overwhelmingly supported the legislation.