Medicare Compliance & Reimbursement

Physicians will get a 1.6-percent pay increase from Medicare, rather than a 4.4-percent decrease, under an omnibus spending bill passed by Congress last week.

The omnibus, totaling almost $400 billion, wraps together the 11 appropriations measures Congress had not managed to pass for fiscal year 2003, which began Oct. 1. Civilian agencies have been operating under a series of stopgap spending measures, generally at FY 2002 funding levels.

Instead of adopting the Senate approach of freezing 2003 physician reimbursement at 2002 rates, as many had expected, Congress went for a long-term fix scored by the Congressional Budget Office at $54 billion over 10 years. But even so, physicians may still face a reimbursement cut in 2004.

The 2003 cut stemmed from underestimates of gross domestic product and the number of Medicare fee-for-service beneficiaries made by the Centers for Medicare and Medicaid Services for 1998 and 1999. CMS Administrator Tom Scully has long expressed the desire to feed corrected numbers for those years into the payment formula — which calculates each year’s reimbursements by building on those from prior years — but has said he lacked the legal authority to do so.

Under the omnibus language, authored by House Ways and Means chair Bill Thomas (R-CA) and passed by the House in December, if CMS corrects its ’98 and ’99 estimates, or makes any other retrospective corrections, no one can challenge the decision administratively or in court.

Congress adopted the language despite CBO’s estimate in a Feb. 11 letter to Senate Budget Committee Chair Don Nickles (R-OK) that it would cost $800 million in 2003, $22 billion through FY 2008, and $54 billion through FY 2012. In December, CBO’s decision to score Thomas’ language, over his strenuous objections, had helped sink its chances in the Senate, along with senators’ reluctance to help physicians without aiding other Medicare providers.

The only other provider money in the omnibus is $300 billion for rural and small-urban hospitals, leaving other providers to focus on an expected economic-stimulus package as their next shot at assistance.

Pending a final determination from Justice Department lawyers that Congress’ action frees CMS to act — which Scully said he has “every expectation” of getting — CMS will make the corrections, yielding a 1.6 percent positive reimbursement update to take effect around March 1.

For 2003 claims processed prior to the implementation date, physicians are receiving payments at 2002 levels because CMS did not issue the 2003 physician payment final rule until the end of December, almost two months after the normal Nov.1 deadline. CMS said it delayed the rule because of concerns regarding anesthesiology payments.

Even with the fix, Scully said Feb. 13, physicians are likely to receive a reimbursement cut in 2004, although a smaller one than under current law. While he emphasized that 2004 update estimates may change “three or four times” before the final update is published, Scully said that “right now, the current estimate, based on current economics” is negative.

Scully was not troubled by this result. “The fact is, you can make an argument that this is correct under the formula because physician spending has grown faster than expected,” he said, adding that “one of the reasons we have the negative update is that we accidentally overpaid doctors by $10 billion over three years in the late nineties so that the base was artificially high.” He declared, “If you’re really trying to get the formula back on track, so that you’re spending the right amount of money ... you may in fact get a couple of negative updates if volume grows too fast or physician spending is too high.”