Medicare law starts clock on fixing payment formula

Physicians face a reimbursement cliff in 2006 unless the update process is changed.

By Markian Hawryluk, AMNews staff. Dec. 22/29, 2003.

Washington -- With a stroke of his pen on Dec. 8, President Bush signed away two years of future cuts in Medicare payments to doctors. But amid the glee over the averted crisis, physician groups realized they have just those two years in which to avoid a disastrous situation.

The Medicare bill signed into law would set updates at a minimum of 1.5% in 2004 and 2005. But because the payment update formula was left primarily intact, the extra spending over the next two years will have to be recouped in 2006 and beyond. Unless the pay formula is revised or eliminated by that time, physicians can expect a sharp reduction, or cliff, in payment.

"We need to come up with a formula that is fair to physicians and takes into consideration actual practice costs and fair reimbursement," said American Medical Association President Donald J. Palmisano, MD.

Knowing they have achieved only a temporary solution, physician groups are mustering forces for an all-out assault on the pay formula next year.

"As the cliff physicians face in 2006 illustrates, a Band-Aid can only stop the hemorrhaging for so long," said Carl Pepine, MD, president of the American College of Cardiology. "The sustainable growth rate formula for making annual updates to Medicare fees is still inherently flawed and does not accurately reflect the cost of physician services. Congress and the physician community must begin working now to solve this long-term problem."

Dr. Pepine said budget constraints prevented Congress from implementing a more permanent solution this year. But House and Senate lawmakers have committed to working with the physician community toward a long-term fix that will prevent the impending cuts.