Medicare fee battle continues; new tanning legislation introduced

May 1, 2007

Dermatologists and other physicians are facing another battle over Medicare fees, with a 9.9 percent cut looming for 2008 unless Congress steps in and provides another one-year fix - or manages an unlikely long-term solution to the problem.

The scramble is under way to avoid that huge reduction announced by the Centers for Medicare & Medicaid Services (CMS) as physician and specialty organizations lobby Congress to provide relief, as it did last year. They are also asking, once again, for a more permanent solution by reforming the Sustainable Growth Rate (SGR) formula that is blamed for causing the continuing fee schedule cuts.

Meanwhile, a divided Medicare Payment Advisory Commission (MedPAC) on March 1 offered Congress two different "pathways" for dealing with the SGR - solutions that were met with skepticism by influential members of Congress during a hearing on the subject. MedPAC also recommended an increase in Medicare fees averaging 1.7 percent for next year.

In its report dealing with the SGR, MedPAC says it is becoming "urgent" to slow Medicare's rising costs, particularly when that is coupled with the projected growth in the number of beneficiaries.

Unless a solution is found, the impact will be felt by taxpayers and beneficiaries alike, the commission says.

The SGR determines the annual update to the physician payment rate consistent with an expenditure target that is tied to growth in the gross domestic product.

"Significant disagreement exists within the Commission about the utility of expenditure targets," MedPAC says. "Moreover, the complexity of the issues make it difficult to recommend any option with confidence."

Thus, MedPAC suggests two options:

"As long as spending targets remain in place, this annual cycle has no end in sight," declared Cecil B. Wilson, M.D., chairman of the American Medical Association's board of trustees, at a Senate Finance Committee hearing on the MedPAC reports.

"We are perplexed as to why MedPAC would one minute state the SGR is broken and unsustainable and in the next breath recommend extending it to all healthcare providers," adds Thomas R. Russell, M.D., executive director of the American College of Surgeons. "If it is broken, fix it; don't expand it."

While committee Chairman Max Baucus (D-Mont.) says experience shows that a target-based system that cuts payment rates may not effectively control the volume of services or overall spending, Sen. Gordon Smith (R-Ore.) doubts that this Congress would deal with the issue.

"Our history is that we don't make the hard decisions until we have no other option," he says.

The problem, of course is cost. Whatever formula is used, even the 1.7 percent increase recommended by MedPAC would increase federal spending by more than $2 billion in the first year and $5 billion to $10 billion over five years. The commission recommended that a $1.35 billion fund established by the Tax Relief and Health Care Act be directed entirely toward covering these costs.

According to the Congressional Budget Office, aligning physician pay with the increasing price of providing care would cost some $262 billion over 10 years. Adding to the political pressure is the impact on beneficiaries, since they are required to pay 25 percent of the Medicare outpatient bill. Thus, any physician pay increase raises their premiums.

The imaging controversy

Meanwhile, the Moran study shows that in 2007, 155 out of the 174 procedures that are capped by the Deficit Reduction Act (DRA) will be paid at a rate less than the estimated cost of performing the service, and in 2010, 204 out of 206 will suffer the same fate.