Government

Senate Finance panel developing 18-month Medicare pay package

At the same time, MedPAC calls for physicians to receive a 1.1% raise next year.

By David Glendinning — Posted Feb. 4, 2008

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Even with Medicare payments to physicians still in doubt for the final half of this year, lawmakers and their Medicare advisers already are thinking about how much doctors will be paid next year.

If Democrats on the Senate Finance Committee have their way, by early summer physicians will know what they'll be paid both in the last half of 2008 and in 2009.

A six-month 0.5% boost is set to run out at the end of June and be replaced with a 10.1% reduction. This means that Medicare would cut pay across the board by 10.6% from current levels from July 1 through the end of the year.

In anticipation of this, Finance Committee members are working on 18-month payment legislation, rather than just another six-month patch, a Democratic aide on the panel said at a Washington, D.C., forum in January.

An 18-month measure would put off the next round of scheduled cuts until 2010 and free Congress from negotiating a 2009 payment update in the height of the presidential election season. The Finance Committee aide did not say how much doctors would get under the plan but said it would be part of a Medicare reform package that would cost between $12 billion and $15 billion over five years.

Congress could simply extend the 0.5% increase through the second half of 2008 without paying for the entire raise. But that action would trigger a 10.6% pay reduction come 2009 under the payment formula. On top of that, the already projected 5% cut for next year would then go into effect.

The American Medical Association favors the longer-term approach. "Congress must tackle this problem head-on in the next few months by passing legislation that raises payments in line with medical practice costs for 18 months," said AMA President Ron Davis, MD. "This will give legislators time to begin creating a new payment system for physicians that will ensure that seniors don't have to worry about whether a physician can care for them."

The AMA advocates elimination of the physician payment formula. "Medicare should base updates on increases in the cost of practicing medicine, similar to how hospitals are paid," Dr. Davis said.

Speaking to reporters the same day as the congressional forum, Health and Human Services Secretary Michael Leavitt did not say whether the White House would support the proposed Finance Committee approach. President Bush has threatened to veto physician payment boosts that use cuts to Medicare private health plans to help pay for them. But the administration believes that another half-year fix is not the answer. "We cannot go on patching this on a six-month-by-six-month basis," Leavitt said.

The billions that would be required to put off pay cuts for a longer time would have to come from somewhere in the program. Finding the money would be difficult because of a Medicare funding warning that sounded last year. The alarm requires President Bush, by law, to include a comprehensive plan for slashing program spending in his fiscal year 2009 budget proposal due in February.

MedPAC strikes a balance

At its January meeting, the Medicare Payment Advisory Commission approved a recommendation on physician pay for next year. If lawmakers were to follow the advice as they develop an 18-month pay package, doctors would receive an estimated 1.1% increase in their Medicare payments next year instead of the 5% reduction that is projected to occur. The recommendation will officially appear in MedPAC's March report.

MedPAC analysts expect that the average cost to physicians of providing care in 2009 will rise by an estimated 2.6%. But they also expect doctors to make practice changes that will bring in more revenue, so they decreased that figure by a projected 1.5% in their final recommendation to account for the anticipated productivity gains. Both estimated figures could change before year's end.

The AMA objects to the deduction for practice changes. "Physician payment updates should not be reduced based on a productivity adjustment that wipes out half the update they should receive to cover inflation in their costs," Dr. Davis said.

If Congress were to take MedPAC's advice, the 2009 update would cost more than $10 billion over five years.

The 1.1% recommendation illustrates the trade-off faced by the commissioners between adequate physician payment and cost control, said Thomas M. Dean, MD, a South Dakota family doctor and one of six physicians on the 17-member panel.

"I am sure that a 1% update does not adequately compensate for increases in practice costs, and there is the real risk of further antagonizing the physician community, many of whom feel they have not been fairly treated by Medicare," he said. "At the same time, I am very concerned about the steadily increasing volume of services and the costs associated with that, as well as the implications all that has for the long-term viability of the Medicare program." Despite his concerns, Dr. Dean supported the plan.

Ronald D. Castellanos, MD, a commissioner and urologist in Fort Myers, Fla., was not convinced that MedPAC struck the right balance. He voted against the recommendation.

"Now we all recognize ... that a plus 1% is much better than minus 5% or 10%, but it doesn't keep up with our costs," he said. "This is still, by the medical community, going to be looked at as a terrible message. And quite honestly, it's insulting."

MedPAC studies patients' access to doctors when considering payment recommendations, and last year's survey does not point to signs of a widespread problem, said John Richardson, a principal policy analyst with MedPAC. "The result of our 2007 beneficiary access survey led us to conclude that, at least from a national perspective, beneficiary access to physician care is good for the vast majority of Medicare beneficiaries, but also that pockets of access difficulties do exist, especially for beneficiaries seeking new primary care physicians."

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ADDITIONAL INFORMATION

Doctors in the middle

The Medicare Payment Advisory Commission in January voted on payment recommendations for 2009.

If Congress were to follow the advice, here are the updates physicians and others would receive:

Update
Hospitals (inpatient and outpatient payment)3.0%
Long-term-care hospitals1.6%
Physicians1.1%
Skilled nursing facilities0%
Home health agencies0%
Inpatient rehabilitation facilities0%

Source: "Clinic Overbooking to Improve Patient Access and Increase Provider Productivity," Decision Sciences, May 2007

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