Physician pay cuts no solution to Medicare Part B problems

The AMA calls for a stop to reimbursement cuts in the near term and innovative answers for the whole program in the long term.

Editorial. May 21, 2007.

The Medicare trustees report released late last month paints a troubling picture of Medicare Part B's financial outlook. Under current law, spending on physician and other outpatient services would increase an average of 6.6% yearly over the next decade -- well above the 4.8% average annual projected growth in the U.S. economy.

But the program's caretakers believe the fiscal reality will be even worse.

Current law estimates include nine years of large cuts in physicians' Medicare payments. The trustees predict that Congress will prevent those reductions from ever occurring. But what would be good news for doctors would be bad news for Part B financing, the report notes.

Freezing physician payment rates each year for nearly a decade would cause the Part B growth rate to average 8.5% annually, according to a Centers for Medicare & Medicaid Services analysis commissioned by the trustees. Giving physicians updates in line with increases in the cost of providing care would boost the rate to a yearly average of 9.3%.

The trustees don't weigh in on whether congressional action along these lines to stop the projected reimbursement cuts is a good or bad idea. Because it is funded by premiums and general tax revenues, Part B can't go "bankrupt" in the way Medicare's hospital trust fund can. However, the report notes, any step to minimize or reverse physician payment reductions would result in bigger premium increases for Medicare beneficiaries and a greater strain on the nation's work force and economy.