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Government News
APA-Backed Bill Would Head Off Medicare Fee Cuts
Psychiatric News
Volume 36 Number 23 page 1-16

To lend weight to a Senate bill that would protect physician Medicare reimbursement rates, APA has joined more than 40 other medical associations to support the Medicare Physician Payment Fairness Act (S 1660).

The bill is sponsored by Sens. Jim Jeffords (I-Vt.) and John Breaux (D-La.). It was introduced in the House of Representatives last month.

The impetus for the proposed legislation was the announcement on October 31 by the Centers for Medicare and Medicaid Services (CMS) that the factor used to update payment rates for individual medical services will go down by 4.8 percent next year, and the conversion factor will be even lower, at 5.4 percent below the 2001 level.

Jay Cutler, J.D., APA’s government relations director, told Psychiatric News, "The negative payment update problem is particularly acute for psychiatrists, who must also contend with underlying limitations in the Medicare program on reimbursement for psychiatric services, such as Medicare’s discriminatory 50 percent copayment requirement. APA is joining the AMA and all of medicine in efforts to correct the problem this year."

In an interview, Edward Gordon, M.D., chair of the APA Medicare Advisory Committee, emphasized the harmful effect the decrease could have on patient care. "Already many psychiatrists are unwilling or unable to take Medicare patients under the current fee schedule," he said. "In New York, for example, Medicare payment is one-third to one-half lower than the prevailing rate for psychiatrists. It is a particularly difficult time to decrease the availability of mental health services when the whole country is under stress."

In announcing the physician payment changes, CMS Administrator Tom Scully said, "The law designing the physician update is incredibly prescriptive.The formula locks us in."

Unless Congress acts to change the formula or delay its implementation, the cuts will take effect on January 1, 2002. In fact, although CMS and medical associations differ on whether the formula has been beneficial to physicians, both sides agree that the federal government currently has little latitude in terms of implementation.

The intent of the complex formula that determines physician reimbursement for treating Medicare beneficiaries is to change payment rates annually to reflect changes in physician practice costs. But, in addition to costs, the formula must also consider a target: the sustainable growth rate (SGR).

The target is based on four factors: gross domestic product (GDP), enrollment in the traditional Medicare program, input prices, and spending due to new laws or regulations.

When actual spending in a given year is inconsistent with the previously established target, the next year’s update must be adjusted to bring spending in line. In 2001 revisions to previous year estimates of GDP, increases in physician spending, and the economic slowdown produced the average decrease of 5.4 percent in physician rates for 2002.

Congress adopted the Medicare fee formula as part of the Balanced Budget Act of 1997. CMS claims that the formula worked well for physicians between 1998 and 2001. The cumulative increase was 15.9 percent, which CMS compares with a medical-cost inflation increase of 9.3 percent.

In their letter supporting the new legislation, however, the medical association signatories charge, "[The 2002 decrease] would be the fourth broad-scale reduction in physicians’ and other practitioners’ fees since 1992 and would bring the average increase in Medicare fees between 1991 and 2002 down to just 1.1 percent a year, or 13 percent less than the government’s own estimate of practice cost inflation."

The November 19 issue of American Medical News reports, "In 1998, when the SGR was introduced, GDP growth for both the current and upcoming year was underestimated by 2 percent. That has lowered the spending target by billions of dollars, increasing the magnitude of the reduction."

That same issue also reports that nearly 30 percent of family physicians are not accepting new Medicare patients.

The most immediate impact of the Medicare Physician Payment Fairness Act would be to trim the decrease in physicians’ rates from 5.4 percent to .9 percent in 2002. In addition, the bill also would require the Medicare Payment Advisory Commission to conduct a study on replacing the SGR as a factor in determining the update for physician payments with a factor that more accurately reflects changes in the costs of providing physicians’ services. The bill has been referred to the Senate Finance Committee, which has not yet acted on it.

The final rule describing revisions to payment policies under the Medicare physician fee schedule for calendar year 2002 can be found at www.hcfa.gov/regs/pfs/. The text of the Medicare Physician Payment Fairness Act can be accessed on the Web at thomas.loc.gov by searching on "S 1660."

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