BY GLORIA BUTLER BALDWIN

The American Medical Association (AMA) reports it is still hot on the trails of Congress to replace the flawed Medicare physician payment formula, which if not changed, will cut physician payments by about 5 percent on Jan. 1, 2007, with cuts totaling nearly 40 percent through 2015. It's also pushing Congress to eliminate counter productive administrative burdens and unfunded mandates.

The 2006 Medicare Trustees Report indicates that from 2007 to 2015, Medicare payments in Tennessee alone will be cut by $4.33 billion. That means an average annual cut over this period of time to be $30,000 per year for each physician.

The first of the nine annual Medicare pay cuts is slated to occur on Jan. 1, 2007. The 2007 cut to Tennessee physicians will be $74 million due to the negative 5 percent update.

Data from the Bureau of Labor Statistics show that these Medicare physician payment cuts will have an impact on 63,638 employees in Tennessee. Tennessee's 862,849 Medicare beneficiaries comprised 14 percent of the state's population in 2005.

As boomers begin to retire, another severe crunch will be put on Medicare. And, while physician Medicare payments continue to drop, costs aren't. In fact, practice costs are expected to increase by over 20 percent during that same period of time.

Under the current system, physicians, unlike other healthcare providers such as hospitals whose payments are expected to rise by more than 3percent per year, are the ones whose payments are controlled by a Sustainable Growth Rate, SGR. They should be, as recommended by the Medicare Payment Advisory Commission, based on annual increases in practice cost.

The Council on Graduate Medical Education is predicting a shortage of 85,000 physicians by 2020. Cuts in Medicare will only make this worse. A 2006 AMA Medicare Physician Payment Survey indicates that Medicare cuts to physicians will hurt access to care for America's seniors and that 45 percent of physicians will either stop accepting or decrease the number of new Medicare patients they accept.

TRICARE, a healthcare provider for military families and retirees, said the cuts will also hurt healthcare access to 172,097 of its beneficiaries.

On July 17, 80 senators met and signed a petition urging Congress to provide positive Medicare payment to physicians in 2007.

In part, the petition stated, "The 2006 average Medicare rates for physicians is about the same as it was in 2001. If the 2007 cut is imposed, the aggregate payment rates since 2001 will have fallen 20 percent below the government's conservative measure of inflation for medical practice cost."

The Alliance of Specialty Medicine is also on the defense. Under the Medicare program, physicians are prohibited from setting their own prices for services, and instead, must accept the amount set forth in the Physician Fee Schedule developed by the Centers for Medicare and Medicaid Services (CMS) as full payment. Each year, the conversion factor, which is one aspect of the equation used to determine reimbursement under the Physician Fee Schedule, is updated by CMS.

Flaws in the formula, used to determine this update have left physicians receiving less payment for the same service from one year to the next. Without a formula fix, physicians will receive less reimbursement in 2013 than they did in 2002 for the exact same procedure, regardless of increases in cost, inflation and expenses. Physicians' ability to provide service to Medicare patients will be severely restricted, leaving more Medicare patients without the care they need.

On Oct. 13, CMS announced a new performance-based method of payment to physicians for the quality of the care they provide to seniors and disabled beneficiaries with chronic conditions. This new three-year demonstration program tests financial incentives for improved quality and coordination in small to medium sized group practices. Under this demonstration, physician groups will continue to be paid on a fee-for-service basis.

The Medicare Care Management Performance (MCMP) Demonstration authorized under section 649 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), will be implemented in four states: Arkansas, California, Massachusetts and Utah in 2007.

Approximately 800 practices in the four states will be recruited to participate in the demonstration.

In order to be eligible to participate, physicians must be the main provider of primary care to at least 50 fee-for-service Medicare beneficiaries in a solo or small to medium-sized group practice, and must submit data annually on up to 26 quality measures related to the care of patients with various illnesses. In its first year, the program will be a pay-for-reporting initiative to provide baseline information on quality and to help physicians become familiar with the quality measurement process. In subsequent years, based on their performance on the quality measures, practices will be eligible to earn an annual incentive of up to $10,000 per physician and up to $50,000 per practice year.

CMS administrator Mark B. McClellan said, "This is another important step toward paying for what we really want: better care at a lower cost, not simply the amount of care provided. We know that most patients receive care in smaller medical practices, which is why it's so important to have an approach that works for making the link between payment and quality of care in these settings.


November 2006