WASHINGTON — Medicare advisors unanimously voted to recommend increasing physician fees by 1.1% next year, while expressing dismay that their June 2008 recommendation to boost primary care pay has not yet been acted upon.

The Medicare Payment Advisory Commission—better known as MedPAC—is charged with advising Congress on setting payment rates for physicians, hospitals, and other health care providers. Its recommendations are included in twice-yearly reports issued in March and June.

Under current law, Medicare physician fees are due to be reduced by 21% in 2010. MedPAC initially considered recommending that physician fees be updated by the projected change in input prices, minus an overall productivity goal that was established by the U.S. Bureau of Labor Statistics. The formula translated into a 1.1% increase, but many MedPAC commissioners were uncomfortable with the language and the possibility that it could be used to reduce fees.

Some even suggested that the panel should be considering a larger increase than 1.1%, but Chairman Glenn Hackbarth said he would not vote to approve a higher number, partly because Medicare has a statutory obligation to keep beneficiaries' Part B premiums for physician services in check. As fees rise, so do Part B premiums. And even small increases in physician fees can translate into billions more in Medicare spending, at a time when Congress is struggling to revive the faltering U.S. economy.

There seems to be no indication that Medicare reimbursement policy is leading to access problems for beneficiaries, according to reports from MedPAC staff members. A survey conducted in the early fall of 2008 found that 76% of beneficiaries said they “never” had a delay in getting an appointment for routine care, and 84% never had a delay when seeking an illness-related appointment. This is better than what has been reported by privately insured patients, said MedPAC staff member Cristina Boccuti.

Medicare fees are about 80% of private pay fees, she said.

Commissioner Nancy Kane, an associate dean of education at the Harvard School of Public Health in Boston, said that the 1.1% increase in fees would not be enough for primary care. “Primary care is in a huge state of crisis,” said Ms. Kane. She asked about the progress of the federal medical home demonstration project, and expressed concern that it could be 7–10 years before Medicare rewarded physicians for participation in medical homes. “That may not be fast enough,” she said, adding that the demonstration is a “drop in the pond. We need to move a whole ocean.”

Mr. Hackbarth pointed out that MedPAC had recommended the pilot project to help move the process along, but acknowledged that “we're talking about a significant amount of time, still.” He said he expected that interim data might support quicker action.

The panel also voted unanimously to again include its June 2008 recommendation that Congress establish a budget-neutral payment adjustment for primary care services.

Primary care could get another boost if Congress follows MedPAC's recommendation to change the equipment use rate for imaging machines that cost more than $1 million. Currently, CMS pays physicians based on an estimate that magnetic resonance imaging, computed tomography, and positron emission tomography are used an average 25 hours per week, but data suggest that 45 hours per week is a more accurate and better target, said MedPAC staff member Ariel Winter. The goal is to push physicians to be more efficient with use of the devices. Adopting the new rate would reduce the practice expense relative value unit by almost 8%.

That change would provide a savings of about $900 million annually, said Mr. Winter. The money could be reallocated to primary care pay and other physician services, if the recommendation is adopted.

MedPAC commissioners also voted to increase hospital payments by the projected increase in the market basket, and to reward high-quality, high-performing facilities with a larger, unspecified increase.

They agreed to reduce the indirect medical education (IME) payment by 1%, which would put it at 4.5% per 10% increment in the resident:bed ratio. MedPAC staff said that the IME payment was a roughly $3 billion subsidy with little required accountability in return. The staff also said that the current rate was set at more than twice the impact of teaching on hospital costs, allowing academic centers to reap higher profits.

The American Hospital Association said it was happy with the vote to increase payments overall. But the IME reduction would “negatively affect the education, clinical care and research missions of teaching hospitals, including their ability to train high-quality physicians,” said AHA Vice President for Policy Don May in a statement.

MedPAC recommended that ambulatory surgery center payments increase by 0.6% in 2010, but also that the facilities be required to report on cost and quality data so that the CMS can better evaluate the adequacy of payments.

MedPAC Urges 1.1% Boost To Physician Fees in 2010