HHS favors minor tweaks to fix Medicare payment

Bush administration proposals would address payment formula volatility.

By Markian Hawryluk, AMNews staff. April 1, 2002.

Washington -- The Bush Administration has backed only limited relief from deep cuts projected for Medicare physician payment over the next four years and suggested modifying, not replacing, the current formula.

There is "no compelling evidence that there is a problem with the overall adequacy of provider payments, although we recognize that recent short-term adjustments have been substantial in the system Medicare uses to pay physicians," U.S. Dept. of Health and Human Services Secretary Tommy Thompson said in a recent letter to Ways and Means Committee Chair William Thomas (R, Calif.).

Thompson said the administration would support adjustments in physician payment as long as they were offset by other savings within Medicare.

The Medicare Payment Advisory Commission has recommended replacing the current formula with one linking physician updates to the estimated change in doctors' costs for the coming year, minus an adjustment for gains in productivity. But the Congressional Budget Office has put the proposal's cost at $126 billion, which even many proponents of the plan say may be too costly given the fiscal restraints Congress faces this year.

Physician groups are challenging the assumptions made by the CBO in reaching that estimate. They believe that the Centers for Medicare & Medicaid Services can implement certain aspects of the MedPAC proposal administratively, and if that were done, it would lower the cost.

"We believe that reasonable and responsible changes in CMS assumptions would significantly reduce the cost of the MedPAC recommendation," said Donald J. Palmisano, MD, secretary-treasurer of the American Medical Association. "Our best estimate is that it would be half of that." [...]