WASHINGTON -- The Centers for Medicare and Medicaid Services (CMS) today began reimbursing physicians 21% less for treating Medicare patients after Congress failed to block the cut.

The lower reimbursement rate technically went into effect on June 1, but CMS had announced that it would not process claims for medical services delivered after the deadline, giving Congress additional time to block the 21% cut. This most recent grace period -- CMS has issued four such reprieves this year -- expired on June 17.

It takes 14 days to pay electronic claims, so in a few weeks, doctors will see reimbursements that are 21% lower than they would normally receive, unless Congress takes action or CMS grants yet another extension.

"It is, frankly, inconceivable that Medicare is beginning to reimburse doctors at a 21% cut over their already below-cost payment level," the Alliance for Speciality Medicine said in a statement. The group will be coming to Washington next week to discuss fixing the Medicare payment system.

The cut is mandated by the sustainable growth rate (SGR) formula, which links physician reimbursement rates to increases in the gross domestic product (GDP). Because spending on physician services has outpaced increases in the GDP, the formula has called for cuts in reimbursements each year over most of the past decade, and Congress has always voted to push those cuts down the road, granting small rate increases instead.

If Congress does pass a retroactive SGR fix, CMS will need to reprocess the claims it paid at the 21% lower rate.

Neil Brooks, MD, a family physicians in Vernon Rockville, Conn., said in an e-mail to MedPage Today and ABC News that he is disgusted by "a Congress that is so dysfunctional that it cannot make a rational decision.

I don't fear the rate cut," he said. "I fear the consequences of the refusal to make a decision. If this is happening now, just imagine what is going to happen when healthcare reform is implemented."

John Messmer, MD, associate professor of Family and Community Medicine at Penn State College of Medicine in Hershey, Pa., expressed similar sentiments.

"There is no other way to describe Congress' actions other than stupid and incompetent," Messmer said in an e-mail.

No Will to Fix the Formula

Although members of Congress universally acknowledge that the SGR is a flawed formula and should be retooled, political will to totally overhaul the formula has been lacking. And this year, short-term fixes have also been subject to major push-back.

In the current effort to delay the 21% cut for six months, Republicans -- and a number of fiscally conservative Democrats -- are refusing to support the bill because it's not paid for.

Democratic senators have been trying for a month to stall the 21% cut by attempting to pass the so-called "doc fix" as part of a larger bill that would extend a number of expired federal programs and create a summer jobs program, among other things.

The doc fix portion has seen a number of iterations over the past month -- at times promising to stave off the cut for three years, then 19-months, and now just six months.

But even the smaller and less expensive bill is not gaining the support of Republicans and some fiscally conservative Democrats. A vote to limit debate on the measure failed to win the necessary 60 votes Thursday night. That vote was considered a test of how many senators supported the bill, and Democrats found themselves four votes short.

Randy Wexler, MD, MPH, assistant professor of Clinical Family Medicine at Ohio State University in Columbus, said he's frustrated with the "we all agree it is flawed but do not have the money to fix it" argument from Congress.

"It is not a new problem, and many other things have been funded in the interim," he said in an e-mail. "It would seem that there is always money to fund other things but not this."

As more time passes without a repeal of the SGR, the cost to fix the problem just keeps growing, said Stuart Guterman, an economist at the Commonwealth Fund.

In 2009, the Congressional Budget Office estimated that a 10-year pay freeze (not a total fix to the SGR) for physicians who treat Medicare patients would cost $318 billion. But a bill that expensive is politically difficult, he noted, so instead Congress breaks it into chunks and passes temporary pay freezes or slight increases instead.

"The thing is, the extra spending happens, whether it's one year at a time or in 10-year chunks," Guterman said.

Fallout Expected to Hit Seniors

The American Medical Association (AMA) has lobbied Congress to pass a permanent overhaul to the SGR for years. At its recent House of Delegates meeting in Chicago, AMA members signed white coats with messages pleading for an SGR fix and shipped them to Washington.

"Continued short-term actions are creating severe instability that harms seniors as physicians make decisions to protect their practices from Medicare's volatility," said AMA president Cecil Wilson, MD.

One of those decisions that physicians must make is whether to continue to accept Medicare patients. Doctors have long threatened to stop seeing them if severe reductions in reimbursement go into effect.

Large group practices may be able to weather the cut in pay, but small group practices and solo physicians -- particularly those in primary care and in rural areas -- will have a tough time, Messmer said.

"It would be particularly difficult for some primary care practices which are already struggling and in some cases could push those doctors toward having to close the practice," said J. Fred Ralston Jr., MD, president of the American College of Physicians.

Isabel V. Hoverman, MD, an internist, has stopped accepting new Medicare patients at her Austin, Texas, practice, where about 30% of her patients are on Medicare.

"We will have no option but to start asking our Medicare patients to find a new primary care physician which already is extremely difficult for patients to find, she wrote in an e-mail. "I can think of no other professional group that has its pay treated in such a cavalier manner."

If physicians stop treating their current Medicare patients, the situation will only get worse because it will be difficult for them to find a new doctor, said Peter Galier, MD, associate professor of medicine at UCLA.

Galier said he'll keep seeing his own Medicare patients "as long as possible."

This article was developed in collaboration with ABC News.