CMS delays bad news, but sees no easy fix to Medicare doctor fees

The Bush administration and physicians urge Congress to quickly address Medicare payment problems during its lame-duck session.

By Markian Hawryluk, amednews staff. Nov. 18, 2002.

Washington -- Physician hopes for an easy fix to Medicare payment woes were dashed when the Centers for Medicare & Medicaid Services confirmed Oct. 31 that doctors would face an average 4.4% cut in 2003 unless Congress steps in.

Despite an 11th-hour delay in publication of the final physician payment rule and persistent rumors that the Bush administration would act on its own to avoid the cut, CMS Administrator Tom Scully said there was "no doubt" that no administrative fix was forthcoming.

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"When the rule comes out, it is likely to be a -4.4% conversion factor, which we think is not appropriate, is not good health care policy and absolutely should be changed by Jan. 1, 2003," Scully said. "However, under the law, we are required to put it out."

The scheduled Nov. 1 publication of the rule containing the 2003 update was delayed due to a problem with payment levels for anesthesiologists' practice expense costs, Scully said. In late October, the agency received new data that called into question its previous decision on anesthesiology payments. Because such changes must be made on a budget-neutral basis, increasing anesthesiology reimbursement would require an across-the-board cut in other payments.

"We were nervous about doing that in an environment where everybody else is going down 4.4%," Scully said. "Based on the late change in the data we have, we think we may have made the wrong call, and unfortunately, it affects everybody, not just the anesthesiologists."

Scully said he expected the rule to be delayed only briefly and that it certainly would be out by Dec. 1. That is the latest that CMS can notify Medicare carriers of the change in payment rates for them to program their computers to pay claims correctly at the start of the year.

"The last thing we want to do is add insult to injury by getting it wrong and having it go down 4.5% or 4.6%, instead of 4.4%," he said. "We don't see any downside in getting it right."

The American Medical Association said CMS made the right decision to wait until it had the correct number before releasing the rule.

"Errors in past calculations gave us the unintended Medicare payment cuts we're fighting now," said AMA President Yank D. Coble Jr., MD. "Another round of Medicare payment cuts based on flawed data will have devastating consequences for America's seniors."

Once the update is announced, physicians will begin to decide whether to participate in Medicare in 2003 and accept the program's rates as payment in full. Participation rates in 2002 remained at 97% of physicians, despite a 5.4% cut in payments. Surveys this year, however, have found that many physicians have continued to see their current patients but limited the number of new Medicare patients they'll accept.

Scully said that while there was no definitive evidence of an access problem for beneficiaries this year, he believes there could be one unless the payment update formula is corrected.

CMS officials are concerned that the announcement of another negative update would prompt large numbers of physicians to abandon Medicare. Scully himself rewrote the first paragraph of a letter to be sent to all physicians informing them of the update once it is announced. The letter urges physicians to continue to treat Medicare patients and pledges that the administration will push for congressional action to restore payments.

97% of physicians participated in Medicare in 2002, despite a 5.4% pay cut.

"I think [doctors] are going to be angry," Scully said. "I'm hoping they'll understand that the administration and most people in Congress on both sides of the aisle want to fix this. But it's caught up in other issues. I find it unfathomable in the long run that this won't be fixed. I hope that physicians will make the decision to hang in there."

Scully expressed frustration with the regulations surrounding the cost estimates for congressional legislation to repair physician reimbursement. Mistakes in estimating growth in the gross domestic product and other factors used to determine physician payment could produce a $30 billion to $40 billion drop in payments for physician services from 2002 to 2005. Although the administration would like to restore those funds, congressional budgetary rules attach a cost to any bill that would do so.

"The whole thing is silly, to be honest," Scully said.

Hope rests on lame-duck session

The House has passed an update fix as part of a Medicare package, which also includes a limited outpatient prescription drug benefit. That measure would increase physician payments by 2% a year for the next three years but would require a permanent change to the formula to avoid catastrophic cuts in 2006.

A Senate Medicare package included the same provision, but it was bogged down with other Medicare payment provisions and a more generous prescription drug benefit. The Senate failed to pass the bill before it recessed for the elections.

At press time, Congress was expected to return in mid-November for a lame-duck session to address 2003 government spending, the creation of the Dept. of Homeland Security and possibly the physician update.

The Bush administration and House Republicans have indicated that they would not support legislation that would increase funding for nonphysician health care practitioners. Scully said the physician payment formula should not be viewed as a payment increase but a technical correction of a mistake.

"This is the one thing that Congress should not, cannot, leave without fixing," Scully said. "It's going to be bad for seniors, bad for docs, unless we fix it."

If Congress does not pass a fix until after Nov. 25, payments at the start of the year likely would reflect the expected 4.4% reduction. Reimbursement for the rest of the year might then be increased to make up the deficit.

The AMA has adopted an "all-out lobbying and grassroots effort" to push for passage of legislation addressing physician payment. The Association urged physicians to contact lawmakers in their home districts before the election and scheduled a fly-in of doctors to visit members of Congress in Washington, D.C.

"Congress must pass legislation early in the lame-duck session to avert a crisis in access for Medicare patients," Dr. Coble said. "Unless Congress acts, Medicare payments by 2005 will be back below the 1991 level, while physician practice costs are expected to rise 40% during that period."

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