GOVERNMENT & MEDICINE

Medicare pay: 2004 forecast looks gloomy

Projected cuts are attributed to a slow economy and higher spending for physician services in 2002.

By Markian Hawryluk, AMNews staff. April 7, 2003.

Washington -- Physicians escaping the proverbial frying pan of a 4.4% cut in Medicare payments in 2003 have found themselves right back in the fire for 2004.

Preliminary estimates of the 2004 update by the Centers for Medicare & Medicaid Services have pegged physicians for a 4.2% cut in rates. The agency stressed the number could still change substantially by November when the final update is announced.

While the Bush administration pushed for Congress to address the cuts in 2002 and 2003, early indications from CMS Administrator Tom Scully do not bode well for physicians. "I'm not sure I would be an advocate of fixing it," he said.

The update is calculated by a complex formula intended, after adjusting for various factors, to allow physician spending to grow at the rate of the gross domestic product. However, the formula requires CMS to estimate certain factors to develop a spending target, called the sustainable growth rate. If that spending target is exceeded, future physician payments must be lowered to make up the difference.

For 2002, CMS said the real per capita GDP grew less than expected, while the volume of physician services grew about two percentage points higher than expected. The combination of those two factors accounted for the vast majority of the negative update revision for 2004.

The growth in spending on physician services caught CMS officials by surprise in light of the 5.4% cut in 2002 payments and the myriad reports of physicians limiting their Medicare case load.

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