Congress Shifting Position on Medicare Payment Increases

Congress is moving toward an increase in Medicare payments for doctors, hospitals, and health maintenance organizations.

The Bush administration’s insistence that any increase in Medicare reimbursement rates for physicians must result in corresponding decreases in other Medicare provider spending had the potential for pitting various segments of the health care system against each other (Psychiatric News, March 1, April 5, May 3).

Health care professionals, however, worked together to pressure Republicans to renounce the Bush administration’s insistence on budget neutrality.

Sam Goldreich of CQ Daily Monitor told www.kaisernetwork.org that the reversal came about because “House Ways and Means Chair Bill Thomas [R-Calif.] and House Energy and Commerce Chair Billy Tauzin [R-La.] decided not to play Bush’s zero-sum game for Medicare providers.

“Instead, they promised rank-and-file Republicans that not only would hospitals get increases, but they would change current law that would have cut [payments to] doctors, nursing homes, and home health operators.”

Hospitals Fight Back

Last March Tommy Thompson, secretary of the Department of Health and Human Services, and Mitchell Daniels Jr., director of the Office of Management and Budget, proposed that increases to physicians be offset by “savings from. . .measured changes in hospital payment updates” (Psychiatric News, May 3).

In a response dated March 26 to the administration’s proposal, a coalition of eight organizations representing hospitals wrote, “More than half [the hospitals] lose money treating Medicare patients. Fully one-third are losing money overall. And, without corrective action, $21 billion in additional reductions will be implemented by October 1, 2002.”

The June 5 New York Times reported that a “quiet rebellion by rank-and-file House members, including many from New York, forced House Republican leaders to reverse themselves [about the proposed cut].”

The Times reported that Republican leaders had reached an agreement to increase Medicare payments to hospitals by $9 billion over the next 10 years instead of cutting payments by $17 billion.

On June 5 www.kaisernetwork.org reported that hospital groups had written letters in praise of the agreement.

An analysis by the AMA, however, points out that the Thomas-Tauzin proposal would only slow currently scheduled reductions in payments for graduate medical education.

More Money for Doctors

Thomas and Tauzin have also proposed increasing Medicare payments to doctors by $20 billion over five years.

According to an analysis of the proposal by the AMA, beginning in 2003 and extending through 2005 physicians would receive annual payment increases of approximately 2 percent, as compared with the current projected cuts of 5.7 percent in 2003, 5.7 percent in 2004, and 2.8 percent in 2005.

The 2002 payment cut of 5.4 percent would remain unchanged.

In 2006 physician payments would again be cut, as the proposal is now constituted. According to the AMA, Thomas and Tauzin have agreed to work toward a more permanent solution that would avoid those cuts.

The AMA is continuing to urge the Centers for Medicare and Medicaid Services to make administrative changes that would eliminate or soften cuts under the current formula. For example, in 1998 and 1999 Medicare officials set spending targets too low and left the costs of more than 1 million beneficiaries out of the system. They also erroneously include the costs of physician-administered drugs when calculating costs of services (Psychiatric News, June 7).

Fixing those errors could restore $62 billion over 10 years to the pool available to make payments to physicians, according to the AMA analysis.

Jay Cutler, J.D., director of APA’s Division of Government Relations, said, “The AMA deserves thanks and praise for helping to demonstrate what a powerful force medicine can be when its practitioners present a united front. The proposal is a good step in the right direction, although it does not offer all that medicine deserves.”

Other winners in the Thomas-Tauzin proposal are managed care companies. The proposal would increase payments to insurance companies that administer Medicare+Choice, the Medicare managed care option.

AARP, formerly the American Association of Retired Persons, is worried that seniors will pay the price for increases to health care providers. David Certner, director of federal affairs at AARP, said that the proposal would mean “less money for drug benefits in a pot that was already insufficient,” according to the Times.

Goldreich told www.kaisernetwork.org that Thomas and Tauzin “swear it isn’t [coming from the prescription drug benefit].”

The committee chairs claim that their proposal for a prescription drug benefit would produce a cut in the cost of prescription drugs for seniors of 30 percent. The savings would be the result of promoting competition among private health insurance companies that would offer policies to cover drugs only and by encouraging them to negotiate discounts with the drug companies.

“Medicare Physician Payment Update Background and Talking Points” is posted on the Web at www.ama-assn.org/ama/pub/article/6930.

Numerous reports on Medicare are posted at www.kaisernetwork.org/daily_reports/rep_index.cfm. ▪