Congress scrambles to trim amount of Medicare pay cut

Bills would reduce the cut in Medicare payments to doctors from 5.4% to 0.9%.

By Markian Hawryluk, amednews staff. Dec. 17, 2001.

Washington -- With less than a month remaining before a 5.4% cut in physician Medicare payments is scheduled to take effect, congressional leaders are striving to bring to a vote a pair of bills that would limit the reduction.

In late November, key members of the House Energy and Commerce Committee unveiled the Medicare Physician Payment Fairness Act. The bill would limit the reduction in Medicare physician payment to 0.9%. It also would require the Medicare Payment Advisory Commission, which advises Congress on Medicare issues, to suggest ways to modify or replace the formula in time for the 2003 update.

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"This study allows Congress time to examine the current payment methodology, review the recommendation of MedPAC and take action next year to create a physician reimbursement system under Medicare that more appropriately accounts for changes in the cost of physician services," said Rep. Michael Bilirakis (R, Fla.), chair of the Energy and Commerce health subcommittee and the primary sponsor of the bill.

At press time, the measure had already garnered 99 co-sponsors and the support of a host of physician groups, including the American Medical Association.

AMA President Richard F. Corlin, MD, said the bill was essential to ensuring access to physician services for Medicare beneficiaries, particularly given the demands placed on doctors by Medicare.

"If you take into account the increase in the number of Medicare beneficiaries and advancing technology, we're not even keeping pace with that," Dr. Corlin said. "We're really looking at a circumstance where the amount of money available for care per senior citizen in real constant dollars is going down. And that's a situation that's inappropriate, and we applaud [Congress'] efforts to try to get it stopped."

Without passage of the bill, physicians fear access to and quality of services for seniors could be harmed. John Schaeffer, MD, a cardiologist from Avon, Ohio, said cuts in Medicare payment would lead to fewer staff members to care for patients at his 40-physician practice.

"Further reduction in physician payments under Medicare will impact my ability to maintain high-quality care and assure access to this care for Medicare beneficiaries," Dr. Schaeffer said. "The entire patient population is affected, because private insurance companies base their rates on the Medicare fee schedule."

Formula flaws

The payment problem can be blamed largely on the sustainable growth rate, a key component of the fee schedule. The SGR is a target for Medicare physician spending. If actual spending on physician services exceeds the target, the government lowers the next year's payment update. If expenditures fall below the target, the update goes up the following year.

The SGR is based on four factors: changes in the gross domestic product, enrollment in the traditional Medicare program, the percentage increase in fees for physician services and changes in physician spending because of new laws or regulations.

This year, revisions to previous year's estimates of the GDP, increases in physician spending and the economic slowdown have added up to a large negative update.

The biggest hurdle will be finding the money to pay for the reduction in the physician pay cut.

According to Energy and Commerce Chair Billy Tauzin (R, La.), the committee worked closely with Tom Scully, administrator of the Centers for Medicare & Medicaid Services, to find an administrative remedy. "The conclusion that everyone came to was that legislation was necessary," he said.

Tauzin said Scully recommended several solutions similar to the bill and that he suspects Scully will be "very supportive" of the legislation. A CMS spokesman said the agency has not taken a position on the measure.

The House bill largely mirrors a Senate bill introduced by Sens. Jim Jeffords (I, Vt.) and John Breaux (D, La.). That bill has 27 co-sponsors but has not progressed toward a vote in the Senate. Jeffords had intended to offer the measure as an amendment to the economic stimulus package, but that legislation has been mired in partisan wrangling.

There are minor differences between the bills. The House version would ask MedPAC for recommendations on modifying or replacing the update formula, while the Senate bill calls for an outright replacement.

Big price tag

The biggest hurdle, however, will be finding the money to pay for the measure. The Congressional Budget Office set its price tag at $1.25 billion. Congress had been prepared to pay much more for physician services until CMS released the 2002 update figure.

But under self-imposed budgeting rules, Congress will have to find savings to offset the difference between the cost of the CMS update and the cost of the bill.

"It's money that had been appropriated," Tauzin said.

House leaders will now look for ways to bring the measure to a vote on the House floor, probably as an amendment to a bill that carries strong support.

"This is on a very fast track," Tauzin said. "We obviously have to get this thing done quickly. We're going to try to put this on something that will pass."

But Energy and Commerce leaders will have to work with members of the House Ways and Means Committee, which also has jurisdiction over Medicare funding issues. Its chair, Rep. William Thomas (R, Calif.), indicated the payment fix was problematic because there is no money available for Medicare, but he also pledged to find the needed funds.

Meanwhile, MedPAC is already working on a new approach to updating physician payments that would link the update to changes in physician costs. The commission is expected to include its proposal in its March report to Congress.

Tauzin said the committee would work with CMS to give MedPAC suggestions on a replacement formula.

"Anything to do to lessen the severe impact, the gyrations in the factor, would certainly be good," Tauzin said.

If Congress were unable to agree on a new method of updating physician payment for 2003, CMS would have to revert to the old formula. That would leave physicians in a hole.

The Commerce Dept. recently revised downward its estimate of the GDP for the second quarter of 2001. That won't affect the 2002 rate, regardless of whether any legislation passes this year. But unless the SGR system is replaced, that downward revision will have a negative impact on the 2003 update.

ADDITIONAL INFORMATION:

Fixing physician pay

The House bill, the Medicare Physician Payment Fairness Act of 2001, would:

Set the update for the 2002 Medicare physician fee schedule at -0.9%.
Instruct the Medicare Payment Advisory Commission to recommend a modification or replacement of the current update formula.
Cost about $1.25 billion.

Source: House Energy and Commerce Committee