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Medicare formula spells pay cut of 4.5% for physicians in 2004

Doctors pin their hopes on Congress to prevent another reduction.

By Markian Hawryluk, amednews staff. Nov. 17, 2003.

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Washington -- Medicare officials have laid their cards on the table by announcing a 4.5% cut in physician payment for 2004. Now, along with physicians, they are openly hoping that Congress will play its trump card and avert the reduction.

The Centers for Medicare & Medicaid Services issued its final rule on the 2004 physician fee schedule in late October as House and Senate negotiators worked to finalize Medicare reform legislation that many expect will prevent the cut.

"The Medicare reform package now pending before Congress contains a provision that would adjust these payments for 2004," said CMS Administrator Tom Scully. "However, CMS has no option other than to base this final rule on the current law."

The final rule included few other major changes in physician payment policy. CMS will go ahead with a new payment structure for care provided to patients with end-stage renal disease. And the agency will move forward with plans to better account for rising medical liability insurance premiums.

Medicare payments to physicians are updated each year under a complex formula designed to allow rates to increase at the same pace as the gross domestic product, after accounting for increased enrollment, new policies and medical inflation. Those factors are used to calculate a spending target that, if exceeded, triggers a reduction in the next update.

The 2004 cut was estimated at 4.2% as recently as August but increased to 4.5% on average in the final rule. CMS said the cut was caused by increased spending for physician services and slower-than-expected growth in the economy.