Medicare Fee Cut Holds, Awaits Congress' Return


Physicians face at least a month's worth of Medicare payment reductions if Congress doesn't reconcile on the provisions of a spending bill by the end of January.

The 2006 Medicare physician payment cut of 4.4%, which began Jan. 1, is the first of 6 years of planned cuts totaling 26%. During this same time, practice costs will increase at least 15%, according to statistics from the American Medical Association.

A measure to stop the 4.4% cut went unaddressed when procedural issues in the Senate and House prevented final action on the 2005 budget reconciliation package.

Although both houses approved the pay freeze, the Senate accepted a number of procedural moves that altered the conference report, and the bill had to go back to the House for final approval.

“Instead of electing to let [House] leaders hash it out and then let the bill go through, Rep. Nancy Pelosi [D-Calif.] demanded a roll call vote—which cannot be taken into consideration until Jan. 31, when Congress returns,” Dr. Larry Fields, president of the American Academy of Family Physicians, said in an interview.

With no legislation passed by both houses and signed by the president, the Centers for Medicare and Medicaid Services is bound by law to put the cuts into place, Dr. Fields added. The hope is that Congress will wrap up its unfinished work on the omnibus appropriations bill by the end of January. Once the bill is signed, CMS would be required by law not to impose the cut.

“Patients and physicians will not understand why technicalities and politics are delaying congressional action to halt devastating Medicare cuts,” said Dr. C. Anderson Hedberg, president of the American College of Physicians. “We call on Congress and CMS to do whatever is necessary to stop the cuts. Both the House and Senate have agreed the cuts should be halted, and we appreciate their good intentions. Yet we are faced with uncertainty and confusion, instead of the decisive action in Washington that our patients require.”

Physicians cannot continue on the current path of being paid less than the cost of providing care, Dr. J. Edward Hill, president of the American Medical Association, said in a statement. “It is our hope that Congress will immediately take up this issue … to halt the payment cuts and retroactively adjust payments.” In the meantime, the AMA will continue to advocate for a fair physician payment formula based on practice costs, “as well as continue to advocate for sound quality improvement initiatives.”

The sustainable growth rate (SGR) is what's driving the cut in Medicare physician pay. It's a component in the Medicare payment formula that determines the conversion factor update each year. Errors made to the formula in 1998 and 1999 led to a 5.4% decrease in physician payments in 2002—decreases that will continue unless the payment formula is corrected. Short-term laws since that time have provided small increases in pay.

A national AMA survey found that 38% of physicians would be forced to limit the number of new Medicare patients they accept into their practice when the cut begins. Of those physicians who will continue to treat Medicare patients, 61% told the AMA they planned to defer purchase of new medical equipment, and 54% said they would defer purchase of information technology.

A freeze represents a slight loss to physicians because of inflation, “but certainly, it's better than a 4.4% cut,” Dr. Fields said. Congress should also work to restore money that would be lost by having a month of reductions.

There's always the slight possibility that they won't act at all, he said. However, he was confident that Congress would solve the SGR problem in the coming year, “so physicians won't have to face future cuts.”