SPECIAL REPORT

Medicare will cut your pay—unless Congress intervenes

Organized medicine is seeking a legislative solution to prevent a dramatic drop in reimbursement rates next year.

By Gail Garfinkel Weiss
Senior Editor

If you've been feeling a bit down lately, wait until you see the Medicare Physician Fee Schedule for 2002. After two years of modest increases, payment rates to physicians are slated to drop 5.4 percent. Physicians' only hope now is for Congress to step in to replace the enigmatic formula used by the Centers for Medicare & Medicaid Services (formerly HCFA) to determine Medicare fees.

Legislation to do just that was introduced in the Senate by Vermont Independent Jim Jeffords on Nov. 8. The bill, co-sponsored by Louisiana Democrat John Breaux, would also limit the reduction to 0.9 percent.

The current fee update formula resulted from the Balanced Budget Act that was passed by Congress in 1997 and went into effect in 1998. Organized medicine has considered it flawed from the beginning.

The key point of contention: The formula is based on the "sustainable growth rate," which takes into account not only Medicare fee-for-service enrollment, variations in fees for physician services, and changes in spending resulting from new laws or regulations, but also fluctuations in the gross domestic product. So when GDP falls, as it did this year, Medicare payment rates for the following year get socked—even if practice expenses rise.

"This presents a very real problem for physicians, particularly those in rural areas who treat many Medicare patients," says AAFP President Warren A. Jones. "We're not talking about doctors looking to make payments on yachts or private airplanes. This is about keeping nursing staff, office staff, and adequate equipment and supplies to take care of patients."

A 5.4 percent cut also bodes ill for Medicaid reimbursement in the states that tie those fees to the Medicare formula, adds AMA Chairman Timothy T. Flaherty. Moreover, private insurers are likely to follow the CMS lead, he says, further eroding physician reimbursement. Flaherty is hoping for a congressional fix that "considers actual practice expenses from previous years and factors in real inflation numbers."