Medicare news keeps getting worse

June 1, 2006

Under the SGR, the trustees projected physician payment rates wouldneed to be reduced by 4 to 5 percent each year through at least2015.

Times may be getting a little more difficult for dermatologists and other physicians who hope to avoid significant future payment reductions from Medicare.

Nor can the report, issued May 1, be seen as good news for physicians, who have been seeking elimination of the Sustainable Growth Rate (SGR) component of the Medicare payment formula, blamed for planned reductions of about 5 percent annually for physicians over the next several years.

Time to pay Peter

In other words, Congress robbed Peter to pay Paul, but at some point Peter must be repaid.

Now, the Trustees say, monthly Medi-care premiums need to be increased to $98.20 next year, up from $88.50 currently and $58.70 in 2003.

The Trustees report projects that the difference between Medicare outlays and revenues dedicated to Medicare is expected to exceed 45 percent of total Medicare expenditures in 2012, meaning that the government, by law, must cut costs, generate more revenue, or use a combination of both to close the gap.

"These projections demonstrate the need for timely and effective action to address Medicare's financial challenges," the report says. "Consideration of such reforms should occur in the relatively near future. The sooner the solutions are enacted, the more flexible and gradual they can be."

'More for better results'

The report points out that Medicare now provides benefits for preventive care and has begun to pay for programs that lower overall costs for beneficiaries with chronic illnesses by preventing complications. It also says "quality and efficiency measures are being used in pilot-testing methods to pay more for better results rather than more services, and have been shown in many instances to significantly reduce costs."

In other words, they like what they see from Pay for Performance trials.

In a fact sheet accompanying the report, CMS points out that its FY 2007 federal budget "significantly" improves the program's financial outlook through steps that reduce cost growth incrementally.

They include, CMS says, "modest reductions in price increases for some providers ... and gradual limits on the rising Medicare subsidy payments received by the highest income Medicare beneficiaries."

To keep general revenue financing below 45 percent of Medicare outlays, the budget proposes to reduce provider payments 0.4 percent below what they would be otherwise - each year; an annual surcharge for Medicare physicians, of sorts.

The report projects that total Medicare expenditures will be 3.2 percent of gross domestic product (GDP) in 2006, reaching 11.0 percent in 2080, reflecting growth in medical prices and the "volume and intensity" of services. In addition, the retirement and aging of the "baby boomer" generation will increase Medicare costs. Today, there are 3.9 workers for every beneficiary; by 2030, that ratio will be 2.4 to 1.

Under the SGR, the trustees projects physician payment rates would need to be reduced by 4 percent to 5 percent each year through at least 2015. "This outcome is likely to be addressed through further Congressional action," CMS observes in its fact sheet, recognizing that modifications are being considered by Congress.