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The payroll tax extension that finally became law on December 23, 2011 includes many provisions that will help Medicare beneficiaries and lower income families (Temporary Payroll Tax Cut Continuation Act of 2011, H.R. 3765; no public law number assigned yet). The payroll tax in question is a reduction in Social Security payroll tax paid by employees that was in effect for all of 2011. The new law also includes an extension of federal unemployment insurance payments. Provisions of the law are effective for only two months, through February 29, 2012.  For this reason, the new year will find the Congress grappling once again with the same issues.

The bill includes provisions that directly affect Medicare and Medicaid beneficiaries and other low income individuals:

Medicare Provider Payments. Of particular significance to all Medicare beneficiaries is the now-annual postponement of a significant cut to Medicare provider payments that would result from the operation of a payment formula known as the Sustainable Growth Rate, or SGR, which was enacted many years ago. This formula is also sometimes called "the doc fix."  Under the SGR law, provider payments would be reduced by 27.4% beginning January 1, 2012; such payment reduction would likely result in serious access issues for Medicare beneficiaries.  The extension legislation will freeze payment rates at the current level for two months.  While most legislators and policy analysts believe the SGR should be repealed and replaced with a different payment system, agreement does not exist on what that system should be.  The legislative impasse on a permanent "fix" results in periodic short term fixes such as that included in this legislation.

Qualified Individual program extension.  Over 400,000 low-income Medicare beneficiaries rely on the Qualified Individual (QI) program to pay their Medicare Part B premium ($99.90 for most people for 2012) each month.  Those eligible for this assistance are Medicare beneficiaries with incomes between 120% and 135% of federal poverty limits (between $1089 and $1226/person/month in 2011; 2012 figures are not yet available) and limited assets. The program, a fixed-amount block grant to states to administer through their Medicaid programs, has been extended for short periods ever since its initial authorization expired in 2002.  The extension legislation authorizes $150 million dollars to continue the program through February 29, 2012.

Therapy Cap Exceptions Process.  For many years, Medicare has imposed a limit on the amount of coverage available for beneficiaries receiving outpatient therapy services. Two distinct caps were placed on therapy services: one for physical therapy and speech-language pathology combined, and the other for occupational therapy by itself. A beneficiary must first cover the deductible, and pay 20% coinsurance. Medicare will then cover the remaining 80% up to the annual cap.

To compensate somewhat for these coverage limits, Congress passed an "Exceptions Process" in the Deficit Reduction Act of 2005 (DRA). The process, which has been reauthorized a number of times since its original passage, was set to expire December 31, 2011. The extension legislation authorizes continued use of the process through February 29, 2012.  For information about using the process, go to

Temporary Medical Assistance (TMA).  TMA is available to allow low-income families to retain Medical Assistance (Medicaid) during a transition period when they become employed and increase their earnings so that they would otherwise lose the assistance. The legislation extends the program through February 29, 2012.

Temporary Assistance for Needy Families (TANF).  TANF was enacted in 2006 to replace the program known as Aid to Families with Dependent Children.  It authorizes a block grant to states to provide cash and other benefits to families in need and to end dependence on government benefits, end out-of-wedlock pregnancy and promote and strengthen two-parent families.  The program is extended through February 29, 2012, funded at the same level as was applicable for the second quarter of fiscal year 2011.

Further Legislation Will be Addressed Beyond February 2012

In addition to passing the above-discussed legislation, the Congress, through party leadership, identified conferees to work in 2012 on a longer extension, or other resolution, of the major provisions included in the temporary extension package.  Democratic conferees are, for the Senate, Senators Baucus (MT), Cardin (MD), Casey (PA) and Reed (RI) and for the House: Members Becerra (CA), Levin (MI), Schwartz (PA), Van Hollen (MD) and Waxman (CA).  Republican Senators have not yet been appointed; Republican House conferees are:  Members Brady (TX), Camp (MI), Ellmers (NC), Hayworth (NY), Price (NC), Reed (NY), Upton (MI), Walden (OR).

New Year Will Bring Further Scrutiny and Debate over the Future of the Medicare Program

In addition to considering more permanent solutions for the programs that have been extended for two months through the Payroll Tax Cut Continuation Act, the 2nd session of the 112th Congress will surely also continue its ongoing discussion about the future of Medicare.

The latest in a series of Medicare proposals that have surfaced over the past year is that unveiled in mid-December by Representative. Paul Ryan (R-WI) and Senator Ron Wyden (D-OR).  The Ryan-Wyden proposal is a twist on Rep. Ryan's failed plan from earlier this year – another effort to privatize Medicare.

The proposal would supposedly "preserve" the traditional Medicare program, but force it to compete with private plans.  Like the original Ryan plan, which the Congressional Budget Office estimated wouldcost Medicare beneficiaries twice as much as traditional Medicare, the Ryan-Wyden plan is based on the flawed assumption that private plans will save Medicare money through competition and innovation.

The Center has proposed a number of solutions to improve Medicare and reduce spending that do not rely on turning the program over to private plans or on increasing beneficiaries' out-of-pocket costs (see  During the coming year, the Center will continue to engage in critical policy debate and will keep our readers apprised of developments.

Please join in these important debates – Medicare's future and access to healthcare for millions of older and disabled people depend upon informed decision-making.  You can help.

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