CMS sticks to 4.2% Medicare pay cut

Physicians wait for Congress to act after proposed rule offers no relief.

By Markian Hawryluk, AMNews staff. Aug. 25, 2003.

Washington -- Sometimes no news is bad news.

In a proposed rule on physician payment, the Centers for Medicare & Medicaid Services stuck to its earlier estimate of a 4.2% cut in 2004 Medicare payments to doctors and suggested few other changes in payment policy. And despite expressing a desire to better account for the increased cost of liability premiums, the agency estimated that those rates would increase more slowly in 2004.

Medicare spending for physician services is expected to increase to $48.7 billion in 2004, up from $47.9 billion in 2003. However, that increase is due to the growing number of services provided to beneficiaries. Payment per service, for the most part, will decline under the congressionally mandated payment formula.

Medicare sets a spending target for each year based on medical inflation, expected growth in the number of beneficiaries, the impact of new laws or regulations and projected growth in the gross domestic product.

If payments exceed the target in any year, the excess must be recouped in the future.

The combination of slower-than-expected growth in the economy and a significant increase in physician spending caused Medicare to overspend in 2002. As a result, Medicare must cut payments by 4.2% next year.

"Physicians should note that while CMS is required to publish a proposed physician fee schedule rule at this time, both the House and Senate versions of Medicare legislation contain provisions that address the proposed fee schedule cuts," said CMS Administrator Tom Scully.