Medicare Compliance & Reimbursement

Doctors would see 1-percent pay increase under proposal.

There is potentially good news for doctors still biting their nails over the proposed pay cut for 2006. Senate Finance Committee Chairman Charles Grassley (R-IA) released a reconciliation proposal that nets $10 billion in savings from Medicare and Medicaid and would actually benefit hospitals and physicians.

The basics: Grassley has proposed a 1-percent increase for Medicare physician payments in 2006, a permanent moratorium on physician-owned specialty hospitals and a delay on the "75 Percent Rule" for inpatient rehabilitation facilities.

While most Medicaid savings proposals do not directly impact hospitals and physicians, half of the Medicare savings relates to the implementation of a value-based purchasing program for providers.

Under the senator's proposal, Medicaid would shoulder $4.3 billion of the savings through $7.5 billion in cuts and $3.3 billion in spending. The program cuts target prescription drug reimbursement, restrictions on asset transfers related to long-term care benefits and additional Medicaid fraud and abuse efforts.

Major spending increases in Medicaid and the State Children's Health Insurance Program include:

• providing 100 percent federal matching assistance for patient care provided to Hurricane Katrina victims that are Medicaid beneficiaries ($1.9 billion over 5 years);

• allowing states the option to extend Medicaid to disabled children of families whose income is at or below 300 percent of the poverty level ($834 million over 5 years); and

• prohibiting HHS approval of using SCHIP funding to cover non-pregnant childless adults.

Savings Rely Heavily On Medicare Reforms

Grassley also proposed a net $5.8 billion spending reduction over 5 years to the Medicare program through $18.6 billion in funding cuts and $12.8 billion in spending.  The two major areas of spending cuts are the Medicare Advantage program and provider payments. The federal government should reduce Medicare provider payments to create a "quality pool" to reward providers that meet certain quality objectives, the senator proposed.

Key Medicare spending proposals included a one-year Medicare physician payment increase of 1 percent, which replaces the projected 4.4 percent decrease in calendar year 2006; a two-year freeze on the 75 Percent Rule's implementation; and a one-year extension of the outpatient therapy caps.

The chairman's numbers also included additional funding for rural hospitals--$184 million over 5 years. The proposal contains no provisions involving Medicare Part D, the prescription drug benefit slated to begin Jan. 1, 2006.