Congress may sweeten Medicare pay

The House bill would replace next year's payment cut with a 1.5% increase.

By Markian Hawryluk, amednews staff. June 30, 2003.

Washington -- A pair of Medicare reform bills speeding their way through Congress offer new hope for physician payment relief.

Physician payments would increase by at least 1.5% in both 2004 and 2005 under the Medicare legislation released earlier this month by House Ways and Means Committee Chair Bill Thomas (R, Calif.) and Energy and Commerce Committee Chair Billy Tauzin (R, La.). Meanwhile, the bipartisan Senate bill would eliminate the payment disparity for rural physicians.

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Despite the expectation that lawmakers will try to amend the bills, pundits say they are all but guaranteed to pass. That means the fate of both physician pay provisions likely will be hashed out by a small group of lawmakers charged with fusing the two measures into a single bill.

By setting physician updates for the next two years at no less than 1.5%, the House legislation would eliminate a 4.2% cut slated to go into effect in January. Calculations of future updates would return to the formula based on the sustainable growth rate, a yearly target designed to allow physician payments to grow more or less at the same rate as the gross domestic product. If payments in a given year exceed that target, future payments to physicians must be cut to make up the difference.

Over the years, the formula has resulted in sharp annual increases and decreases in Medicare physician payment rates, including a 5.4% cut in 2002. The House bill would seek to smooth the saw-tooth pattern of updates by using a 10-year rolling average of GDP.

According to Yank D. Coble Jr., MD, outgoing president of the American Medical Association, the current formula threatens access to care for Medicare beneficiaries because it is tied to the ups and downs of the economy, not patients' health care needs. The House bill would address that.

"The physician payment provision averts a Medicare meltdown by reversing the cuts predicted for 2004 and 2005 due to the flawed Medicare payment formula," Dr. Coble said.

Update fix still lacking

The AMA also expressed support for the Senate bill but bemoaned its lack of an update fix. The Senate measure, however, would raise Medicare payments to physicians in rural regions that have historically received lower-than-average rates because of geographic adjustments.

Payment disparities are linked to shortages of health care workers in rural areas.

After a small adjustment in 2004, the Senate bill would increase payments to physicians in all areas of the country at least to the national average in 2005 through 2008, but it would not lower payments to physicians paid above the average. In 2009, payment would revert to the current geographically adjusted formula.

The legislation "ends Medicare's historic discrimination against states that do more with less," said Sen. Charles Grassley (R, Iowa), chair of the Senate Finance Committee and a sponsor of the bill. "Medicare's complex funding formula penalizes states such as Iowa for practicing cost-effective medicine. This creates a disincentive for physicians to practice medicine in these states."

Although the finance committee is dominated by lawmakers from rural states, members expressed strong interest in addressing the update issue as well during the panel's debate over the Medicare legislation.

"With the costs for physicians and others increasing as they are, this is clearly unsustainable," Sen. Jon Kyl (R, Ariz.) said. "We'll be lucky to have half of the physicians available to serve our Medicare senior patients by 2006 if all of this transpires."

Kyl offered and then withdrew an amendment that would have set the update at 2.5% in 2004 and equal to medical inflation in 2005. The amendment would have meant cuts of more than 5% in 2006 and 2007 but would have given Congress time to fix or replace the pay formula before then.

The finance panel was unsure about the cost of the amendment and had no funding left for 2004 to accommodate the increase. But several senators spoke in favor of preventing the 2004 cut and pledged to work toward a solution as the Medicare bill moved to the Senate floor.

Grassley expressed dismay that Congress had added $54 billion to physician payment earlier this year, believing it would result in positive updates for several years. He chided Tom Scully, administrator of the Centers for Medicare & Medicaid Services, over the miscalculation.

"I'd like to have you tell us who the bureaucrat is who told us that was going to fix the formula," Grassley said. "Now here we are back with probably another $54 billion."

The Bush administration has yet to publicly support additional funds for physician payment for 2004. But President Bush raised the topic during a roundtable with doctors from the Illinois State Medical Society. ISMS President William Kobler, MD, said Bush indicated it was not his intent to cut physician payments. Bush has also supported geographic equity in payment, writing a letter of support for the rural funding provisions in Grassley's bill earlier this year.

Going for it all

As debate over the bills moves forward, physicians are trying to avoid having to choose between supporting an overall physician update or better pay for rural doctors.

"We don't look at this as an either/or situation," said Tom Evans, MD, a family physician from Des Moines who heads the Iowa Medical Society. "We need to figure out how we do both, and I think we're positioned to do that."

Dr. Evans said payment disparities in Iowa have led to an acute health care shortage. Physicians, nurses and office staff are leaving rural states for better paying regions of the country. He cited an example of a laboratory assistant from Dubuque who was recruited to Texas.

"For us to retain those employees in the state, we've got to increase pay," Dr. Evans said. "It's undermining our ability to maintain the infrastructure of the health care system in the smaller states."

The Iowa group is one of 24 state societies that have joined with the American Academy of Family Physicians to form a coalition in support of Medicare geographic equity.

"This is the best chance we've had to address these issues," Dr. Evans said. "There's a lot of traction."

William Jessee, MD, president of the Medical Group Management Assn., said it was difficult to prioritize one issue over the other but that the payment update might be the bigger long-term issue.

"It's very difficult to actually figure out what the rural fix translates to in terms of percentage impact on fees, but it's likely that it's less than the 4.2% cut that the SGR will produce next year," Dr. Jessee said.

"Even if they fix the rural issue, it's not going to be a very good year for rural physicians if they don't fix the SGR issue."

ADDITIONAL INFORMATION:

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The Medicare reform bills include many other provisions affecting physicians.

The Senate bill would:

Require HHS to calculate when rural physicians are due bonus payments.
Reduce overpayments for drugs administered by physicians but increase payments for administering them.
Expand physician self-referral prohibitions to include doctor-owned specialty hospitals.
Allow physicians to appeal Medicare enrollment denials.
Place limits on carriers' ability to investigate claims and seek repayments.

The House bill would:

Require Medicare to tell physicians if a service will be covered before it is provided.
Improve mammography screening payments.
Establish coverage for initial preventive screening exams.
Reform Medicare's coverage determination process.
Provide coverage for lipids and cholesterol screening.