A tentative deal is in place that will continue to hold off the 27.4 percent cut in Medicare physician payment rates, though it will be paid for with cuts to other federal healthcare funding.

The deal, struck between House Ways and Means Chairman David Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) as part a broader payroll tax cut extension, will extend current physician payment rates until the end of 2012, according to CNN.

According to the healthcare blog The Hill, savings used to pay for the extension include:

• $5 billion in cuts to the Patient Protection and Affordable Care Act’s (PPACA) trust fund for preventative services;

• $2.5 billion in savings from the elimination of enhanced Medicaid payments to Louisiana as a result of Hurricane Katrina;
• $4 billion in cuts in Medicaid Disproportionate Share Hospital payments;
• $6.8 billion in hospital “bad debt” payments; and
• Cuts to clinical laboratory payments.

Other Medicare programs, such as ambulance add-on payments and outpatient hospital hold harmless payments, will be extended until the end of the year, but at least two programs—Section 508 hospitals and special pathology payments—will be phased out.

Peter W. Carmel, MD, president of the American Medical Association, issued a statement calling the agreement “another patch” and a missed opportunity to permanently replace the Medicare physician payment formula.

“People outside of Washington question the logic of spending nearly $20 billion to postpone one cut for a higher cut next year, while increasing the cost of a permanent solution by about another $25 billion,” he said.

Susan Turney, MD, president and CEO of the Medical Group Management Association-American College of Medical Practice Executives also shared her organization's frustration with the deal.

“Physician practices now face a mounting 35 percent payment threat from Medicare in 2013 and Congress has dug itself a $400 billion hole,” said Turney. “Group practices are telling us that this congressional decision exacerbates an already unhealthy environment that limits their ability to plan for the future and balance their practice's fiscal health with their desire to continue to serve Medicare beneficiaries.”

A vote on the deal is expected this week.