The U.S. House of Representatives today passed a bill (HR 674) that would eliminate a 3 percent tax withholding on Medicare payments that was created under the Tax Increase Prevention and Reconciliation Act of 2005. The provision, scheduled to take effect in January 2012, requires a mandatory 3 percent withholding from payments made by government agencies in an attempt to address tax noncompliance. Although programs with eligibility based on recipient income (e.g., Medicaid) would be exempt, programs with eligibility based on age (e.g., Medicare) would not be. The bill now heads to the U.S. Senate. The Senate must also pass this bill for it to become law.
If this provision is allowed to take effect, the Internal Revenue Service would require Medicare contractors to withhold 3 percent of Medicare payments to physicians and other health care providers. The 3 percent payment cut would be in addition to any cuts brought on by the Medicare physician payment formula.
The withholdings would then be applied to physicians’ tax obligations for the year. Any withholdings in excess of actual taxes due would be refunded after physicians file their tax returns the following spring.
SFMS, CMA, and others in organized medicine have told Congress that this flawed provision is untenable in the current Medicare payment system. Not only is there a 20 percent gap between what Medicare pays physicians and the actual cost of providing care to physicians, but physicians are also facing a 30 percent cut on January 1 due to the broken sustainable growth rate (SGR) formula.
See additional information in the Wall Street Journal article