Steep reduction certain unless groups convince Congress otherwise

November 1, 2007

An impending cut of 9.9 percent in average Medicare reimbursement rates is only months away and will be imposed unless physician organizations and specialty groups, including those representing dermatologists, can convince Congress to reach a solution.

Late in September, a strategy that would have used a popular children's health bill to slip through language that would have turned that huge reduction into a 0.5 percent increase in both 2008 and 2009 was scuttled as lawmakers scrambled to maximize the vote count in anticipation of a presidential veto.

The bill was the State Children's Health Insurance Program (SCHIP) reauthorization, which would increase that program by $35 billion per year.

Physician organizations had hoped that negotiators could preserve that language while crafting a compromise. But lawmakers decided not to risk it.

"As part of the compromise between the Senate and the House, House leaders have agreed to put aside Medicare for the time being so we can focus on getting health insurance to children," says Sen. Charles Grassley (R-Iowa), the top Republican on the Senate Finance Committee.

Some Republican senators had threatened to withdraw their support because of that provision, objecting to its funding through elimination of federal subsidies to private Medicare plans.

The American Medical Association expressed disappointment at the decision. "Congress has two important access-to-healthcare priorities that must be addressed this year," declared AMA President-elect Nancy H. Nielsen, M.D., Ph.D., "renewing health care coverage for kids and preserving seniors' access to care."

The issue of physician reimbursement has been argued as being key to senior access to medical care, with physician organizations contending that many physicians will simply stop serving Medicare patients if scheduled cuts take effect.

Now it appears that physician organizations will have to push their reimbursement measure through Congress on its own merit, or find another bill to which it can be attached.

But the challenge appears to be formidable. Supporters apparently must find another way to offset the estimated cost of $65 billion over 10 years, and time is running out as the next round of cuts is scheduled to become effective Jan. 1.

The sharp reimbursement reduction was necessitated because Congress, for the past several years, has intervened and stopped "negative updates" (fee cuts), providing immediate relief but only postponing eventual larger reductions unless the system for determining Medicare fees is reformed. Complicating the matter, of course, is the continuing pressure to reduce federal domestic spending and curtail steadily climbing healthcare costs - and the requirement that any additional spending proposal must be accompanied by a method to pay the cost.

Acting CMS Administrator Leslie V. Norwalk noted that over the past five years, Congress has intervened to prevent the implementation of negative updates resulting from the sustainable growth rate (SGR) formula provided by Medicare law. She says CMS will continue to work with lawmakers and physician groups "to identify payment methods that help improve the quality and efficiency of care in a way that is cognizant of the costs to taxpayers and to Medicare and its beneficiaries."

Norwalk acknowledged that "The Medicare program needs to compensate physicians appropriately for the services they provide," adding that "how" the program pays also matters, and that means focusing on quality and performance - a priority of the current administration.

In mid-May, nearly 80 professional medical organizations sent a letter to every lawmaker outlining recommendations for overhauling the Medicare reimbursement system. The first recommendation calls for a full, immediate repeal of the SGR formula. The fall-back recommendation was to establish 2016 as the "date certain" to complete the transition to a new system that would update physician pay based on increases in the cost of providing care.