Medicare pay formula: Overhaul is needed

Congressional action saves physicians from a scheduled pay cut and adds momentum to the push for a change in the way Medicare pays doctors.

Editorial. Feb. 27, 2006.

Early this month, Congress finalized action to spare physicians from a drastic 4.4% cut in 2006 Medicare physician payments, which took effect Jan. 1. The lawmakers replaced it with a retroactive rate freeze at 2005 levels.

Organized medicine fought hard for this intervention, and it was a long time coming. Even now, it is not the end of the story.

It was a relief when legislators finally took this step after procedural issues stalled progress late last year. The Association also expressed appreciation for the advance planning by the Centers for Medicare & Medicaid Services to facilitate quick implementation of the 2006 payment change as soon as it became law. Since then, the AMA has continued to work closely with CMS to make the process as smooth as possible for physicians.

But it is important to remember that, even with this update correction factored in, the year's reimbursements will fall short of the actual cost of providing care to seniors. Thus, the AMA is right to maintain its commitment to securing necessary changes in the way physician payments are calculated under Medicare. Specifically, the current payment schedule includes an estimated six straight years of cumulative cuts totaling 26% -- a set of numbers that could become even more stark with the March release of this year's Medicare Trustees report. These reductions would occur even as practice costs continue to increase.