CMS rule hurts chances for pay reform

The new decision on the Medicare reimbursement formula draws a strong rebuke from the AMA.

By David Glendinning, AMNews staff. Nov. 21, 2005.

Washington -- The Centers for Medicare & Medicaid Services delivered a disappointing rejection to doctors hoping that the agency would help cover the costs of overhauling the Medicare physician payment system.

The final 2006 payment rule that CMS recently unveiled had some expected bad news in the form of a confirmed 4.4% reimbursement cut, which will kick in Jan. 1, 2006, unless Congress acts to prevent it. But buried in the more than 1,200 pages of regulations was a long-awaited statement on an administrative step that doctors believe would fix part of the problem with the Medicare payment formula and help pave the road to broader reform.

Medicare officials determined that they lack statutory authority to remove physician-administered drugs from the sustainable growth rate formula that helps determine rates.

Doctors argue that spending on these drugs should not be part of the physician payment formula because they cannot control medication prices. Reimbursement for these drugs is not handled through the physician fee schedule, and their inclusion in the formula artificially boosts Medicare spending on physician services, they say. This results in payment cuts when the level of spending on physician services exceeds the formula's predetermined target.

For more than a year, CMS has been under pressure from lawmakers and groups, including the American Medical Association, to take the drugs out of the picture retroactive to 1996. This move would rejigger the fee schedule to free up more than $100 billion that would flow back into doctors' pay.