Medicare Compliance & Reimbursement

Only a few months after Congress turned a looming 4.4 percent Medicare pay cut into a 1.6 percent increase for 2003, physicians are facing a 4.2 percent cut in 2004, with another cut expected in 2005.

The 2004 negative update, contained in the Centers for Medicare & Medicaid Services' proposed physician fee schedule, may not stand. The House Medicare bill would ensure increases of at least 1.5 percent in 2004 and 2005 for physicians. The Senate bill puts the chamber on record against reimbursement cuts but leaves actually preventing them to separate legislation. Such legislation, however, may face a skeptical reception from key senators like Finance Committee Chair Charles Grassley (R-IA).

CMS Aug. 8 attributed its proposed reimbursement cut primarily to slow growth in the economy and a large 2002 increase in physician spending. The agency adjusts physician compensation up or down to match actual spending to a statutory target called "the sustainable growth rate," which increases as gross domestic product, medical inflation, and the number of fee-for-service Medicare beneficiaries increase.

CMS' proposed pay cut is not a surprise. Administrator Tom Scully warned of it back in February, even as Congress was upping physician compensation to the tune of $54 billion over ten years by allowing CMS to revise past underestimates of economic growth and the number of FFS beneficiaries.

In an Aug. 11 statement, the American Medical Association, which has long opposed the presence of GDP in the physician payment formula, blasted the anticipated cuts and the formula as "based on the ups and downs of the overall U.S. economy, not the health care needs of America's seniors." Policymakers initially included GDP in the SGR calculations in an attempt to hold down rapidly growing Medicare spending on physician services.