CMS sticks to 4.2% Medicare pay cut

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

By Markian Hawryluk, amednews 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.

Paying for premiums
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Topic: Medicare payment

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.

CMS sees an average national increase of 6.6% for 2004 liability rates.

"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.

At press time, congressional negotiators still were working to resolve differences between the House and Senate versions of the Medicare reform bills. The House bill would provide for a minimum update of 1.5% for 2004, while the Senate bill includes language supporting a reversal of the cuts in 2004 and 2005.

The proposed rule emphasized the importance of passing a Medicare bill with a positive payment update, said Donald J. Palmisano, MD, president of the American Medical Association.

"Without prompt action by Congress, the repercussions of this payment cut will be felt by senior and disabled patients who rely on Medicare to provide health care," Dr. Palmisano said. "Doctors are reaching a breaking point, where they can't afford to keep accepting new Medicare patients and keep their practices open."

Physician groups have called for Congress to fix or replace the physician payment formula, but that is likely to be a long process. In the meantime, physicians must rely on interim steps to prevent cuts each year.

Formula tweaks

CMS also is proposing to change the way it calculates medical inflation for physicians and to modify the geographic adjustments used to account for regional differences in costs.

The rule would increase the weight given to rising liability premiums in calculating an overall measure of medical inflation known as the Medicare Economic Index, part of the payment formula. That would allow Medicare spending to better account for the rise or fall of liability premium costs, CMS said.

However, CMS estimates of growth in premiums will be lower. Last year, it set liability cost increases at 11.3% in calculating 2003 rates. For 2004 rates, the agency predicts an average national increase of 6.6%.

"The AMA is encouraged that CMS thinks it is vital that the Medicare physician payment formula accurately reflects the burden medical liability premiums have placed on physicians," Dr. Palmisano said. "But we're concerned that the Medicare rates do not adequately reflect spiraling rates for liability premiums."

The agency also plans to revise the geographic practice cost indices that are intended to account for regional differences in practice expense, physician work and liability premium costs. Revisions of the work and practice adjusters will wait until the 2005 rule because the 2000 census data on which it will be based is not available.

CMS intends to adjust the liability geographic index using actual premium data from 1999 through 2002 and estimated premium data for 2003. That information should be available later this year in time to include the new adjuster in the final rule in November. That could increase payments to areas with higher-than-average liability premiums but would lower payments in low-cost areas an equal amount to ensure that overall spending for physician services does not increase.

The rule also would make several payment changes for specific physician services.

The agency has proposed a new way to pay physicians for oversight of patients with end-stage renal disease. Medicare currently pays a fixed rate to physicians for medical oversight, without considering the patient's condition or the number of physician visits. The rule proposes three levels of payments. Physicians would be paid the lowest amount if they see the patient only once a month and the highest amount if they see the patient four or more times in a month.

Nephrologists surprised

Dale Singer, executive director of the Renal Physicians Assn., said the change in payment caught nephrologists by surprise.

"We've had discussions with CMS and our own membership about frequency of visits and improving communication," Singer said. "But as far as the specifics of what was in the rule, we had no clue this was coming."

Although the group is still analyzing the details of the proposed change, Singer expressed concern that the change was made outside of the established process for coding changes that allows for physician input.

CMS said the move was prompted by a recent study that found more physician-patient contact time in hemodialysis facilities led to a lower mortality risk.

Additionally, the rule would create special codes to allow physicians to bill for cardiac telemetry, a new technology that allows physicians to monitor heart rhythms via the telephone. And payments for removing benign and malignant skin lesions would be revised to reflect the size of the excision, rather than the type of lesion.

CMS said it plans to issue a separate rule in the near future to revamp the way Medicare pays for drugs administered in physicians' offices. Because oncologists and certain other specialists rely on cross-subsidies from drug payments, that rule is expected to contain practice expense changes that also would impact the physician fee schedule.

ADDITIONAL INFORMATION:

Paying for premiums

Although increases in liability premiums will play a larger role in the Medicare payment formula, the government's estimate of premium growth for 2004 is lower than it was for 2003.