Congress to look at Medicare pay formula

But lawmakers are short on ideas about how to fix the flawed reimbursement calculation.

By Markian Hawryluk, AMNews staff. March 22/29, 2004.

Washington -- Physicians pushing for Medicare payment reform are hoping that Congress makes good on its intentions.

As lawmakers worked to finalize legislation laying out a fiscal year 2005 budget blueprint, the Senate Budget Committee attached a provision expressing the Senate's intent for Congress and the administration to correct "major flaws" in the formula used to determine Medicare payments for physician services. At press time, the Senate had not yet voted on the budget measure.

"While recent actions by Congress have helped address immediate reductions in reimbursement, further action by Congress is urgently needed to put in place a new formula or mechanism for updating Medicare physician fees in 2006 and thereafter," the physician payment amendment stated.

The provision, offered by Sen. Jim Bunning (R, Ky.), also calls on the Centers for Medicare & Medicaid Services to change the way the formula is calculated. That could include eliminating Medicare-covered drugs and biologics from the physician spending totals used to determine updates and more accurately accounting for the direct and indirect costs resulting from government coverage decisions.

Under the current payment formula, when spending for physician services exceeds an annual target, called the sustainable growth rate, future payments must be reduced to make up for the excess spending.

Physician groups, including the American Medical Association, argue that doctors have been held responsible for increases stemming from higher drug costs and new coverage mandates, despite having no control over this spending.