Physicians win Medicare payment relief

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

By Markian Hawryluk, amednews 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.

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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.

Doctor groups said the bill would help maintain access to physician services for seniors and the disabled and would avert a Medicare disaster.

"The Medicare physician payment provision in the budget bill helps shore up Medicare's foundation," said Yank D. Coble Jr., MD, president of the American Medical Association. "America's seniors should not pay for the government's mistakes, and we are pleased that both Congress and President Bush recognized that and will stop the Medicare cuts and fix past mistakes."

The vote effectively ends a two-year lobbying campaign by the AMA and specialty and state medical societies to avert the cuts. CMS Administrator Tom Scully said that even with the indemnification provision, the agency still would need Justice Dept. approval to make the corrections. But he said that likely was only a formality, and he expects the bill's provision to be sufficient to increase doctors' payments.

CMS had delayed implementation of this year's cut until March 1 in the hope that Congress would pass a payment increase. Scully said the vote's timing would allow most Medicare contractors to reprogram computers in time to pay at the new, increased 2003 rates on March 1, but that there may be a couple of days' delay in processing claims in some areas.

"This bill comes just in the nick of time for Medicare patients and the physicians who care for them," Dr. Coble said. CMS and physician groups will keep a close eye on whether the fix is enough to keep doctors in Medicare. Many have reported limiting the number of Medicare patients they see, while others were contemplating moving to nonparticipating status if the cut went into effect.

"It was essential for Congress to address physician reimbursement in the spending bill," said Rep. Nancy Johnson (R, Conn.), chair of the House Ways and Means health subcommittee. "With malpractice insurance skyrocketing, nursing costs rising and doctors being forced to pay new clerical staff to deal with paperwork, the payment cuts [were] unjustifiable and unfair. We [were] shortchanging our physicians, threatening both access to care and quality of care for our seniors as more doctors [were] forced to pull out of the Medicare program or over-schedule."

Rough road ahead

The CMS correction will increase physician payments in future years, but likely not enough to avoid a payment cut in 2004. Because many components of the formula are still moving targets, Medicare officials could not specify what the update would be in future years once the errors are corrected. CMS is due to release the initial projection of the 2004 update in March.

"Because of a variety of factors, most likely under the current estimates you will still get a negative update next year, but it will be smaller," Scully said.

The bill raises Medicare physician spending by $54 billion over the next 10 years.

He told a congressional hearing that the administration had not decided if it would pursue an additional legislative fix of the physician payment formula this year.

"In my opinion, the formula will largely be fixed, but we will still look at making some changes," he said.

Physician groups already have begun a push to modify the way payment updates are calculated each year. Sara Walker, MD, president of the American College of Physicians--American Society of Internal Medicine, said additional changes in Medicare policy would be needed for payments to keep pace with increases in practice expenses.

"We look forward to working with the Centers for Medicare & Medicaid Services on implementing the beneficial changes approved by Congress, as well as other changes in Medicare payment policies that may be required," Dr. Walker said. "The goal must be to assure that Medicare patients have continued access to physician services by guaranteeing that Medicare payments will keep pace with the rising costs of delivering care."

Physician groups have urged CMS to exclude the cost of outpatient prescription drugs and clinical laboratory tests covered by Medicare from its calculation of the spending targets for physician services. Physicians argue that they have no control over the price of those drugs and should not be penalized for the rampant inflation in drug costs in recent years.

Scully said there are valid arguments on both sides of the issue and that current policy reflects physician control over the utilization growth of the outpatient drugs and laboratory services.

"I'm certainly willing to look at pulling out the drugs," Scully said. "But simply pulling the drugs out [without further changes to the formula] would cause the update to go through the roof."