Congress clarifies "red flags" rule as Senate looks to pass 1-year doc fix

by Brendon Nafziger, DOTmed News Associate Editor | December 08, 2010
Doctors' political campaigns look to be paying off.

Congress passed an exemption for doctors from the so-called red flags rule Tuesday. Meanwhile, reports suggest the Senate is moving closer to a one-year freeze on steep Medicare payment cuts to doctors.

The U.S. House of Representatives passed S.3987, the "Red Flag Program Clarification Act of 2010." The Senate unanimously passed a version of the bill last week, so now it's up to President Obama to sign it before the Jan. 1 deadline.

The red flags rule comes from a 2003 law that requires creditors to use identity theft prevention programs. The Federal Trade Commission ruled that doctors who bill their patients are creditors and thus must set up the costly protection systems. It was originally scheduled to go into effect two years ago, but after doctors protested, the FTC delayed the rule five times.

This spring, the American Medical Association and other doctors groups, including the American Osteopathic Association, took their objections to federal court to force the FTC to change the rules.

"The AMA is pleased that this legislation supports the AMA's long-standing argument to the FTC that physicians are not creditors," the group's president, Dr. Cecil B. Wilson, said in a statement.

Also on Capitol Hill, key Senators have announced they've reached a deal on a one-year "doc fix". The deal would freeze Medicare payment cuts to doctors of 25 percent, scheduled to start in January, by biting into the tax subsidies provided to lower income consumers under health reform, according to Politico.

Senate Majority Leader Harry Reid (D-Nev.), Minority Leader Mitch McConnell (R-Ky.), Finance Committee Chairman Max Baucus (Mont.) and ranking Republican Chuck Grassley (Iowa) announced the deal late Tuesday, Politico said. The Senate is expected to vote on the bill as early as Wednesday. The House is mulling similar legislation, according to American Medical News.

To help offset the $19.2 billion cost of the one-year patch, the bill will increase tax subsidy overpayment penalties. In 2014, some consumers will be able to buy health insurance from state-run exchanges. To help lower and middle income people pay for the insurance, the Internal Revenue Service will provide tax subsidies. For people who misreport their taxes or whose income rises mid-year, the health reform law set up a flat penalty of $250 for individuals and $450 for families that would have to be paid back to the IRS. Under the new bill, the penalties would now be raised along a sliding scale according to reported income, with caps now set at $600 and $3,500, Politico said.

The Medicare cuts come from the sustainable growth rate formula developed during a 1990s spurt of Congressional frugality, which tries to keep Medicare payments to doctors in line with domestic growth. Overturning the formula is expected to cost more than $200 billion.

An early draft of the health reform legislation included the fix but was dropped because of its costs, according to reports.