Legislative: The battle for reform: Congress challenged to change, preserve Medicare system

October 1, 2008

Although the 5.4 percent Medicare pay cut for 2009 that had been slated by the Centers for Medicare & Medicaid Services (CMS) has been averted, the challenge to reform the system that determines physician payments will be dumped in the lap of the new 111th Congress that takes office in January.

Key Points

Although the 5.4 percent Medicare pay cut for 2009 that had been slated by the Centers for Medicare & Medicaid Services (CMS) has been averted, the challenge to reform the system that determines physician payments will be dumped in the lap of the new 111th Congress that takes office in January.

The reduction contained in the Medicare Physician Fee Schedule, announced by CMS on June 30, was replaced with a 1.1 percent increase for 2009 when Congress approved the Medicare Improvement for Patients and Physicians Act of 2008 over President Bush's veto in July.

That same action eliminated the 10.6 percent cut that had been scheduled for this year.

According to the American Academy of Dermatology (AAD), dermatologists "made repeated calls to their House and Senate lawmakers urging support" of the bill.

"Physicians across the country flexed their political muscle and secured one of the most significant legislative victories in recent history," according to the academy.

AAD also encouraged members this summer to "look for opportunities to thank lawmakers who voted to help physicians and ensure that Medicare beneficiaries continue to have timely access to dermatology services."

Now, however, attention turns to the new Congress, which is expected to focus on healthcare reform legislation early in the session - the details of which will be influenced by which candidate wins the presidency.

Seeking reform

Regardless, efforts to reform the Sustainable Growth Rate (SGR) formula, which essentially dictates Medicare fee levels, could well become part of that debate.

Last July's action set the stage for discussions next year regarding the decade-old formula that requires payment cuts to physicians whenever the growth rate in Medicare costs climbs above the growth in the gross domestic product (GDP).

Physicians' groups, including AAD, have argued that the formula is unfair, outdated and must be reformed.

The Congressional Budget Office estimates that a 1 percent update for 2009 funded in a way that produces no budgetary effects after 2009 would lead to a 21 percent cut in 2010, thus adding urgency to the need to deal with the SGR formula issue before then.

The American Medical Association (AMA) has been leading the effort to reform the SGR formula, which it says:

Under Medicare law, each year's payment update calculation starts with the Medicare Economic Index (MEI), a government index of practice cost inflation.

The update is then adjusted from MEI based on the SGR, created by Congress in 1997 as a target rate of growth in Medicare spending for physician services.

'Fatal flaws'

AMA contends that SGR has these "fatal flaws":

AMA says services that may save money for Medicare as a whole or improve quality can still lead to cuts in Medicare physician payment rates.

The cost of these drugs is not a "physician service" and should be excluded from calculations, making them inaccurate.

Ongoing battle

The battle to reform the SGR has been building virtually since its original implementation, as annual physician pay cuts have been announced, and then emergency action was required to prevent them from taking place.

All of this is wrapped up in the overall issue of preserving the financial viability of the Medicare program, as there is a significant cost associated with changing the system.

Thus, it is likely that broad Medicare reform legislation will be required to provide a permanent solution to this continuing problem.

And that may well come as Congress, beginning in early 2009, addresses the overall healthcare issues that have been debated in this year's campaign for the White House.

Former congressional aide Bob Gatty covers Washington for businesses specializing in healthcare and related issues. He has written Dermatology Times' Washington Report for more than 20 years, and welcomes comments and suggestions. Mr. Gatty is available at: bob@gattyedits.com