Physicians win Medicare payment relief

With an increase secured for 2003, the AMA will focus on preventing a cut next year.

By Markian Hawryluk, AMNews staff. March 3, 2003.

Washington -- Physicians hoping for a freeze in Medicare payments for 2003 got something better -- a thaw -- as Congress voted to replace a 4.4% cut this year with a 1.6% increase.

But shortly before the vote that provided the pay relief, Medicare officials indicated that physicians likely would face a cut in 2004, and there may not be widespread support within the Bush administration to avert it.

The 2003 payment increase comes as the result of a provision in the massive federal spending bill Congress passed in mid-February. The provision protects the Bush administration from lawsuits if it corrects the errors in the formula used to calculate Medicare physician payment updates from year to year.

When passed in 1997, the formula required Medicare to use estimates of the gross domestic product and fee-for-service enrollment in formulating 1998 and 1999 spending targets. Errors in those estimates resulted in a 5.4% cut in 2002 and would have meant additional cuts every year until 2009. While the Centers for Medicare & Medicaid Services acknowledged that it was using erroneous data, it maintained that the law would not allow the agency to use actual data to correct the calculations.

By letting CMS fix the errors, the bill would raise Medicare spending for physician services by $54 billion over 10 years. And because many private insurers base their rates on the Medicare fee schedule, the true benefit to physician practices will be even greater. President Bush has said he will sign the measure.