Medicare payment formula: House GOP proposes temporary fix

The plan would eliminate cuts for three years but would require further action to avoid future reductions.

By Markian Hawryluk, AMNews staff. June 3, 2002.

Washington -- Instead of facing major cuts in Medicare pay, physicians would see reimbursement increases over the next three years under provisions House Republicans plan to include in their comprehensive Medicare reform bill.

The proposal would grant relief to physicians through 2005 but would necessitate further action by Congress or the Bush administration to prevent deep cuts in 2006.

The GOP proposal would give physicians a 2% update in 2003, instead of the 5.7% cut they would face under current law. The updates for 2004 and 2005 would be calculated using a modified formula that would make it less likely that physicians would reach the spending targets that trigger payment cuts. Updates under the GOP's modified formula are projected at 1.8% in 2004 and 1.9% in 2005. Under current law, doctors would see estimated reductions of 5.7% and 2.8%, respectively, in those years.

But the proposal would not change the formula for 2006 and beyond. Physician pay would revert to current law, causing substantial pay cuts in those years, unless Congress and the administration stepped in to avoid what is being referred to as "the cliff."

The AMA has thrown its support firmly behind the bill as the only payment fix on the table.

"We are encouraged by the concern shown and the work that they've done to correct that defect," said AMA Board of Trustees Chair Timothy T. Flaherty, MD. Although Dr. Flaherty expressed concern about the 2006 payment cliff, he said the measure would give Congress the time to address formula problems for the long term. [...]