Medicare Compliance & Reimbursement

Thomas and Johnson are working to get more dollars to doctors.

House Ways and Means Chair Bill Thomas (R-CA) is pushing the Centers for Medicare & Medicaid Services to administratively bump up Medicare reimbursement for physicians.
 
Besides boosting reimbursement on their own, the steps urged by Thomas and Health Subcommittee Chair Nancy Johnson (R-CT) in an April 1 letter could ease the way for a broader legislative fix for the pay formula that lawmakers are expected to propose sometime in the next few years. Raising physician compensation administratively in the meantime could raise the baseline cost against which the Congressional Budget Office would calculate the cost of future legislation, making a formula overhaul look cheaper and more doable in a tight budget climate.

Good news: It's nearly inevitable that Congress will attempt some formula fix. The new Medicare law guarantees physicians pay hikes of at least 1.5 percent in 2004 and 2005. However, if the current-law pay formula continues to operate, without similar future year-to-year legislative adjustments CMS actuaries predict that physicians would see annual pay cuts of about 5 percent from 2006 through 2012. Virtually no one believes Congress will allow that to happen.

Fee-for-service Medicare reimburses physicians under a "sustainable growth rate" formula. The scheme, adopted in 1997 in an attempt to check rapid increases in physician spending, sets an annual spending target for "physicians' services" that is tied to the growth in the overall gross domestic product. CMS projects whether actual spending will fall above or below the target, then adjusts reimbursement rates up or down so that spending is projected to hit the target.

Thomas and Johnson want CMS to modify the SGR formula in three ways: first, exclude the cost of physician-administered drugs from calculations of projected spending; second, more fully account for new benefits when setting the SGR target; third, re-examine assumptions about how physicians will change their behavior in response to reimbursement changes. Excluding Prescription Drugs. Prescription drug costs have almost tripled as a percentage of total physician costs subject to the SGR, rising from 3.5 percent of total cost in 1996 to 10.0 percent in 2003.

"This cost growth cannot be controlled by physicians, yet they are being penalized for prescription drug price increases," the Ways and Means GOP leaders say. They argue that CMS is free to exclude drug costs from the formula because the statutory definition of "physicians' services" does not specifically refer to drugs. Fully Accounting For New Benefits. Currently, CMS only raises the SGR target when Congress adds Medicare benefits through legislation. CMS should also raise the target when it adds benefits itself by means of national coverage determinations, Thomas and Johnson say, citing statutory language stating that the target should be adjusted to [...]