President Obama signed legislation this month that will permanently change how Medicare pays doctors, a rare bipartisan achievement by Democrats and Republicans that will end years of short-term fixes.

The bill, known as the “doc fix,” overhauls a 1997 law that aimed to slow Medicare’s growth by limiting reimbursements to doctors. It resulted in a wave of doctors threatening to stop accepting Medicare, so Congress repeatedly blocked the payment reductions.

“It encourages us to continue to make the health care system smarter without denying service. As a consequence, it’s going to be good for people who use Medicare. It’s going to be good for our seniors. Ultimately it’s going to be good for all of us,” Mr. Obama said.

The law “starts encouraging payments based on quality, not the number of tests that are provided or the number of procedures that are applied but whether or not people actually start feeling better,” the president said. “It encourages us to continue to make the system better without denying service.”

The bill blocked a 21 percent cut in Medicare payments that was due to take effect this month. It also alters the program that dictates how physicians will be paid in the future, by providing financial incentives for physicians to bill Medicare patients for their overall care, not individual office visits.

In a written statement to health care providers, the agency said only “a small volume of claims” are being processed at the lower levels. Those payments will later be reprocessed so providers receive their full fees, the agency said.