Medicare Compliance & Reimbursement

Physicians are slated to receive a 4.5 percent cut in Medicare reimbursement under a final rule scheduled for publication in the Nov. 7 Federal Register.

Sen. Charles Grassely (R-IA) told reporters Oct. 30 that congressional Medicare negotiators would include language blocking the cut in their conference report, although he would not specify what form that language would take. The House Medicare bill would give physicians positive updates of no less than 1.5 percent in 2004 and 2005, while the Senate bill would maintain current law governing physician compensation.

The 4.5 percent reimbursement cut is up slightly from the 4.2 percent decrease the Centers for Medicare & Medicaid Services projected in its August proposed rule. The agency explained in an Oct. 30 statement that physician compensation is set by a statutory formula "that requires CMS to adjust the update up or down depending on how actual expenditures compare to a target rate, called the 'sustainable growth rate.'"

In 2002, "the number of services provided by physicians grew dramatically," necessitating the cut, CMS said.

Even with the reimbursement rate decrease, CMS projects that Medicare will pay physicians $48.8 billion in 2004, up 1.7 percent from an estimated $48.0 billion this year. The new impending cut comes less than a year after Congress pumped an additional $54 billion over ten years into physician compensation in an attempt to avert projected cuts in 2003 and subsequent years.

American Medical Association President Donald Palmisano, MD, called the 4.5 percent cut an "outrage" and said it would worsen difficulties seniors are already having getting appointments with physicians. But speaking to reporters Oct. 22, CMS Administrator Tom Scully suggested that the cut stems from formula changes advocated by the AMA itself.

In the Balanced Budget Act of 1997, Scully said, "nursing homes got crushed, home health got crushed, hospitals got hit very hard, but physicians didn't get hit. Why was that? Because the AMA made a trade-off to tighten up the SGR formula. It was their idea." He said that "the formula is working as expected" and that physician spending is about where it was projected to be in the '97 bill.

"They cooked this baby up," Scully said of the AMA.