Congress delays Medicare reimbursement cut

February 1, 2008

Dermatologists and other physicians who treat Medicare patients have been given a short reprieve from the across-the-board 10.1 percent reimbursement cut that was scheduled for Jan. 1 - and even have received a bit of a raise.

Key Points

Washington - Dermatologists and other physicians who treat Medicare patients have been given a short reprieve from the across-the-board 10.1 percent reimbursement cut that was scheduled for Jan. 1 - and even have received a bit of a raise.

Now, they must do what they can to prevent that cut from taking effect July 1.

As Congress raced to get out of town for Christmas, it gave final approval to the Medicare, Medicaid and SCHIP Extension Act of 2007, which, instead of imposing the 10.1 percent cut, provided a 0.5 percent increase.

The American Medical Association (AMA), the Alliance of Specialty Medicine (of which the American Academy of Dermatology is a member) and other medical groups sought - and continue to seek - a permanent solution to the payment formula problem that lies at the heart of the fee schedule dilemma that has forced Congress to intervene year after year as pay cuts are threatened.

However, Congressional Budget Office estimates of the cost of replacing that formula with one more favorable to physicians continue to skyrocket and make the likelihood of enacting such legislation during 2008 remote, at best.

Instead, it is considered likely that Congress will use the six months' reprieve that it passed in December to develop a longer-term approach - perhaps one that is long enough to move the issue to the 2009 Congress, which many expect to be considering major healthcare reform legislation.

While that interim remedy is considered, however, there is concern over what steps Congress will take to cover the cost.

According to the Congressional Budget Office, the six-month reprieve for physicians will cost $1.4 billion over five years.

Those costs were offset by cuts to a special stabilization fund for Medicare Advantage plans.

Under a plan advanced by Senate Democrats, a two-year update would have included annual pay increases by equalizing per-capita pay between traditional Medicare and Medicare Advantage, a proposal that was supported by both the AMA and the American Association of Retired People (AARP).

However, Senate Republicans objected, and President Bush threatened to veto any bill that cut Medicare pay to private plans.

The bottom line, however, is that whatever increase is approved by Congress next year must be offset with cuts elsewhere in order to comply with Congress's pay-go budget rule.

One fact is clear: The longer the matter is left unresolved, the more the ultimate solution will cost, as the number of Medicare recipients continues to increase as baby boomers reach retirement age.

Clearly, it is a problem that Congress and the administration must eventually confront.

As a report from the Congressional Budget Office in November 2007 declared, "Without changes in federal law, federal spending on Medicare and Medicaid is on a path that cannot be sustained."

Another interesting factor could complicate the issue even further if the Bush administration sticks to its guns.

In early December, Health and Human Services Secretary Mike Leavitt demanded that any Medicare legislation include a requirement that doctors use new information technology standards. The Bush administration wanted to tie any legislation blocking the cut in 2007 to physicians' adoption of health IT in their offices.

While that demand was not met in the "reprieve" legislation, it could crop up in the debate this spring.

In early December, Mr. Leavitt sent a letter to Senate Finance Committee Chairman Sen. Max Baucus (D-Mont.) and ranking member Sen. Chuck Grassley (R-Iowa) stating that remedial legislation should "condition receipt of a portion of any fee adjustment to adoption of certified electronic health information technology."

Further, "Physicians who do not adopt appropriate available technology should receive a lower payment than those who do."

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