CMS finalizes 1.5% doctor pay increase, adds new patient benefits

Medicare expenditures on physicians are expected to rise 4% next year. More money for cancer treatments and physicals is on the way.

By David Glendinning, AMNews staff. Nov. 22/29, 2004.

Washington -- Total Medicare spending on physician services is in line to increase by more than $2 billion in 2005, federal officials said.

The Centers for Medicare & Medicaid Services announced the projected boost in conjunction with the release of the agency's final physician payment rule. Thanks in part to a congressionally mandated 1.5% reimbursement raise for doctors, CMS expects that aggregate spending under the new fee schedule will increase 4%, from $53.1 billion to $55.3 billion.

Other contributing factors include an expected uptick in beneficiaries' use of Medicare services and the addition of new benefits that Congress approved last year.

Starting in January, beneficiaries entering the program for the first time can receive a subsidized "Welcome to Medicare" physical. New coverage for tests that screen for heart disease and diabetes help round out a package of preventive services that CMS says will decrease health costs in the long run.

Responding to comments on its proposed payment rule issued last summer, CMS decided to dedicate more funding to the new physicals. Doctors will receive separate payments for the screening electrocardiogram and the initial physical. In addition, physicians who determine that a patient needs more medical attention the same day as the physical can bill Medicare for a more extensive office visit.

But with additional or expanded benefits comes the potential for more spending on physician services in the short run. The American Medical Association remains concerned that the benefits, if improperly accounted for by CMS, could cause total spending on doctors to exceed the sustainable growth rate limit for the year and result in more severe rate cuts in the future. This would hit doctors hard, given that projected medical inflation for next year already exceeds the 2005 rate update by more than 1%.