New bill offers Medicare physician pay formula fix

Lawmakers look for affordable ways to implement the Medicare Payment Advisory Commission recommendations.

By Markian Hawryluk, amednews staff. March 25, 2002.

Washington -- New legislation has set a starting point for this year's efforts to fix Medicare's physician payment update formula. Proponents will now focus on ways to reduce the cost of the measure and find the money to pay for it.

Rep. Nancy Johnson (R, Conn.) introduced the Preserving Patient Access to Physicians Act of 2002 in early March. The bill would implement the recommendations of the Medicare Payment Advisory Commission.

Getting doctors more money
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Specifically, the bill would repeal the current formula, which relies on a spending target called the sustainable growth rate to update physician payments. Instead, Medicare reimbursement to physicians would be adjusted each year based on the estimated change in doctors' costs for the coming year, minus an adjustment for gains in productivity. The measure also would set the update for 2003 at 2.5%.

"I am committed to providing physicians with a more stable, predictable and fair payment formula," Johnson said in introducing the bill. "Absent such reform, we will shortchange our physicians and threaten both access to care and quality of care for our seniors."

The MedPAC proposal is expected to cost a hefty $126 billion over 10 years, a figure that the Bush administration and some congressional leaders have said would be too expensive. The price represents the difference between estimated spending under the bill's proposed formula and the projected outlays under the current formula. The Congressional Budget Office predicted that without changes to the formula, Medicare payments for physician services would be reduced 28% between 2002 and 2005.

But the bill's sponsors are trying to convince the CBO that those projections overestimate the size of the savings under the current formula. If they succeed, it would lower the price tag for the update system proposed in the new legislation. Republican leaders on the House Ways and Means Committee intended to lay out their arguments for reducing the estimate in a letter to the CBO in mid-March.

The MedPAC proposal is expected to cost $126 billion over 10 years.

The American Medical Association is taking similar arguments to the Centers for Medicare & Medicaid Services, whose actuary priced the MedPAC proposal at $128 billion over 10 years.

In a letter to CMS Administrator Tom Scully, the AMA asked whether the agency was assuming that physicians would increase the volume of services provided if the restraints on overall Medicare physician spending provided by the existing formula were removed.

Limits on total Medicare spending for physician services won't have an impact on the individual decisions doctors make, the AMA said.

The administration has supported a fix to the update formula but only if other savings can be found to offset the increase in payments to doctors.

AMA Executive Vice President Michael D. Maves, MD, questioned whether that was possible. "It is difficult to see how meaningful relief can be achieved, however, if the administration puts a $128 billion price tag on the MedPAC proposal and then insists on a budget-neutral solution," Dr. Maves said in the letter. "We believe both positions must be re-examined."

Opening salvo

Johnson's bill is considered more of a launching point than a finished product and may be included as part of a broader Medicare reform package that would establish an outpatient prescription drug benefit.

Unlike a measure introduced last year that would have limited the Medicare physician payment cut to 0.9%, Johnson's legislation does not address 2002 payments. Last year's payment reform measure was never brought to a vote. Johnson's bill would, however, guarantee physicians a 2.5% increase in payment next year, regardless of changes in economic data, physician spending or physician costs.

Without formula changes, Medicare physician services payments will fall 28% by 2005.

Physician groups hailed the measure as a step toward ensuring beneficiaries' ability to see a physician when needed.

The bill "will avert further deterioration in access to care for Medicare patients," said AMA President Richard F. Corlin, MD. "Facing a cumulative cut in real terms of nearly 30%, many physicians will be forced to stop participating in the Medicare program."

William Hall, MD, president of the American College of Physicians--American Society of Internal Medicine, said the legislation would make "positive reforms" and would move the physician payment update system closer to the way other health care practitioners are paid by Medicare.

"Hospitals, nursing homes and other providers routinely receive increased reimbursement when their costs rise," Dr. Hall said. "Physicians, on the other hand, have seen their costs increase while Medicare cuts reimbursement and piles on costly new regulations."

The Johnson bill also includes a provision requiring MedPAC to study the effects of refinements made to the practice expense component during transition to a resource-based payment system in 2002. Committee members are concerned that practice expense changes have left some specialties worse off than others.

ADDITIONAL INFORMATION:

Getting doctors more money

A new bill to reform Medicare's physician payment update formula would implement Medicare Payment Advisory Commission recommendations. It would:

Set the 2003 update at 2.5%.
Update Medicare reimbursement to physicians each year based on the estimated change in doctors' costs for the coming year, minus an adjustment for gains in productivity.
Require MedPAC to study the impact of the changes in the practice expense portion of the physician fee schedule.

Weblink

Thomas, the federal legislative information service, for bill summary, status and full text of the Preserving Patient Access to Physicians Act of 2002 (HR 3882) (http://thomas.loc.gov/)