Doctors could face 4 years of Medicare payment cuts

Unless formula is changed, pay might drop to decade-low levels.

By Markian Hawryluk, AMNews staff. March 18, 2002.

Washington -- Physicians could face negative payment updates through 2005 unless the current reimbursement formula is changed, according to new estimates from a congressional advisory panel.

The Medicare Payment Advisory Commission estimates that physicians will face a cumulative 17% cut in payments from 2002 through 2005, resulting in reimbursements in 2005 at levels lower than those in 1993.

MedPAC has recommended that Congress adopt a new formula to update payments for physician services. It would base reimbursement updates on the estimated change in doctors' costs for the coming year, minus an adjustment for gains in productivity. Under that formula, the physician update for 2002 would have been 2.5%, as opposed to -4.9% under the current formula. Additional factors brought the total 2002 cut to 5.4%.

MedPAC Chair Glenn Hackbarth told the House Ways and Means health subcommittee that Congress must choose between setting accurate pay rates and controlling total spending on physician services. "These two goals can seldom be achieved simultaneously," he said.

Part of the problem with the current formula is that it provides no incentive for an individual physician to control volume, Hackbarth said. In fact, the reductions caused by the strict formula can prompt physicians to increase the volume of visits and tests to make up for the shortfall, he said.

On the other hand, many lawmakers fear that without limits on physician payment, Medicare spending could spiral out of control. Dan Crippen, director of the Congressional Budget Office, said that even under the current payment formula, total spending for physician services could be "unsustainable" in the long run. [...]