Proposed Medicare cuts would average 9.9 percent

The dramatic but not unexpected cut is contained in a proposed rule released July 2 by the Centers for Medicare and Medicaid Services (CMS) that would revise payment rates and policies under the Medicare Physician Fee Schedule.

"This proposed rule is a further step in Medicare's efforts to ensure that payment policies provide incentives to improve quality of care," says acting CMS Administrator Leslie V. Norwalk.

"Today's release of the proposed 2008 Medicare physician payment rule serves as yet another reminder of the need for congressional action to stop scheduled payment cuts to physicians," he declared. "Next year alone, Medicare will cut payments to physicians by 10 percent. Over nine years, the cuts swell to 40 percent, while medical practice costs increase 20 percent. The numbers just don't add up."

Immediate gratification

The sharp reduction was necessitated because Congress, for the past several years, has intervened and stopped "negative updates" (fee cuts) in their tracks, providing immediate relief but only postponing eventual larger reductions unless the system for determining Medicare fees is reformed.

Complicating the matter, of course, is the continuing pressure to reduce federal domestic spending and curtail steadily climbing healthcare costs.

Dr. Wilson pointed out that last year, Congress set aside $1.35 billion that could be used to reduce the scheduled 2008 pay cut. But despite recommendations from the AMA and some 85 other physician and health professional organizations that the money be used to help physician payments keep pace with practice cost increases, and a similar recommendation from the Medicare Payment Advisory Commission (MedPAC), CMS has proposed using those funds to provide a 1.5 percent to 2 percent bonus to physicians who report on quality measures.

"Today, Medicare pays doctors the same as it did in 2001," Dr. Wilson pointed out. "More than 60 percent of doctors say they will be forced to limit the number of new Medicare patients they can treat when the cut goes through. Seniors' access to healthcare is in jeopardy."

Noting that over the past five years, Congress has intervened to prevent the implementation of negative updates resulting from the sustainable growth rate (SGR) formula provided by Medicare law, Ms. Norwalk says CMS will continue to work with lawmakers and physician groups "to identify payment methods that help improve the quality and efficiency of care in a way that is cognizant of the costs to taxpayers and to Medicare and its beneficiaries."

Kinder, gentler system?

Ms. Norwalk acknowledges that "The Medicare program needs to compensate physicians appropriately for the services they provide," but, she says, "how" the program pays also matters, and that means focusing on quality and performance - the mantra of the current administration.

The proposed fee schedule rule also includes a revision in the way the agency will pay for Part B drugs. Under the proposal, the average sales price (ASP) for Part B drugs would be determined by requiring drug manufacturers to reduce their prices based on volume - what CMS calls "bundled price concessions." The ASP would be based on the dollar value of units of each drug sold under the bundled arrangement.

CMS says such a requirement would help ASPs better reflect the true costs incurred by physicians when purchasing drugs covered by Part B. The issue, of course, stems from Medicare's belief that physicians are profiting unduly from such drugs.