Medicare Payments Under a Cloud

Although the new Medicare law reversed apotential cut in Medicare payments to physiciansfor 2004 and a federal advisory panelis recommending a heftier reimbursementincrease for 2005, doctors are not out of the woods.Future concerns: While a recommendation from theMedicare Payment Advisory Committee would hike the2005 increase in doctor payments from 1.5% to 2.5%,a report from the Medicare Trustees projects a series ofsignificant fee cuts stretching for 8 years starting in 2006.

The Medicare Modernization Act of 2003, whichturned payment cuts into fee increases for 2004 and2005, merely pushed the problem further into the future,according to officials at the Centers for Medicare andMedicaid Services (CMS), which oversees the governmenthealth care programs. The payment increases forthis year and next will push spending on doctors' serviceseven further over the target set by the CMS.

To get back on course, according to the MedicareTrustees report, annual payments to doctors under Medicarewill have to be slashed by about 5% a year from2006 to 2012. While 85% of US physicians treat Medicarepatients today, as many as 40% say they will limit ordiscontinue care if there are more reimbursement cuts.

Most pundits predict that Congress will act to preventsuch a string of devastating pay cuts, but it won't beeasy or politically popular. Balancing the budget for PartB (ie, the portion of Medicare that pays for physician services)by raising Part B premiums is likely to cause painfor many Medicare beneficiaries, as the increases willoutpace both the inflation rate and any increases in beneficiaries'incomes. In addition, Part B beneficiaries arealready looking at a 17% increase in their premiumsnext year—this increase will take effect before anythingis done to fix the physician payment problem.

Incoming CMS Administrator Mark McClellan,MD, MBA, is on record as being opposed to using lowerprovider payments to cut costs. He says the newMedicare law will allow the government to reduce costsin other ways, which would improve the long-term outlookfor payments, but hasn't been specific on how thatmight be done. Both Dr. McClellan and TommyThompson, US Secretary of Health and Human Services,want to see medical liability reform, which would easesome of the cost burden on doctors.

A quick fix may not be in the cards, though. Withnot much likely to happen before the 2004 presidentialand congressional elections, that leaves little more than ayear to hammer out any changes in the fee schedules thatwould avoid the looming cuts.