Medicare fees slated to shrink by 10.1% in 2008.

Unless Congress steps in, the Centers for Medicare and Medicaid Services will reduce payments to physicians by about 10% beginning in January 2008, a slightly deeper fee cut than had been proposed earlier in the year.

Federal estimates show that the Medicare program will spend about $59 billion for services under its Physician Fee Schedule in 2008. Some 900,000 doctors participate in Medicare, according to the CMS.

The 10% cut is a direct result of Congress again failing to come up with an alternative to the sustainable growth rate (SGR), the formula that sets physician payment rates partly on the growth in the gross domestic product. For the last 5 years, Congress has at the last minute disregarded the SGR and legislated temporary 1- or 2-year adjustments in payments.

In the fall of 2006, legislators froze 2007 payment rates at 2006 levels. That action averted a slated 5% cut, but it also set the stage for a 10% cut in 2008 because, by law, the 5% difference had to be accounted for at some point.

Physician organizations have sought a permanent replacement of the SGR, but that's unlikely as the congressional sessions wind down this year. Instead, the battle again will be to reverse the cuts, at least for 2 years, and to find a way to cover the payments. Congress is required to offset any new spending.

The American Medical Association (AMA) has been urging lawmakers to obtain the required money from the Medicare Advantage program, which it says is overfunded by $54 billion.

Another potential offset source is the $1.35 billion that has been set aside for the Physician Quality Reporting Initiative. Physicians who participate in PQRI are eligible to receive a bonus of up to 1.5%. The American College of Physicians (ACP), the AMA, and other physician organizations have said their members are less likely to have the time or resources available to participate if they are facing a 10% decline in overall pay.

The 1,481-page rule announcing the fee schedule also contains many other changes in how physicians are reimbursed for various services, and what types of services are covered. Among the biggest changes: Anesthesiologists are due to get a 32% increase in their work value, a result of a recommendation by the American Medical Association's Relative Value Update Committee. But anesthesiologists still will feel the pinch of the 10% overall cut.

"The cuts will accelerate the collapse of primary care, create access problems, and manufacture obstacles to fundamental reform of physician policies," Dr. David C. Dale, ACP president, said in a statement.

Dr. Dale noted that an AMA survey found that more than half of physicians said that they would limit the number of new Medicare patients, and two-thirds would defer purchase of information technology if the cuts go through.

"We can't tolerate a 10% fee cut," said Dr. James King, president of the American Academy of Family Physicians (AAFP). Such a deep reduction means that physicians won't be able to keep up with practice expenses.

Moreover, the yearly uncertainty regarding Medicare rates is making it more difficult to plan--whether that means taking on new Medicare patients or recruiting new physicians, Dr. King noted in an interview.

The ACP, AAFP, AMA, and other organizations said they want Congress to pass legislation to provide an increase in fees for both 2008 and 2009 so that legislators do not have to revisit the issue in 2008 during the distraction of the presidential campaign, Robert Doherty, ACP senior vice president for governmental affairs and public policy, said in an interview.

And, Dr. King said, a freeze at current levels won't be enough, since expenses continue to rise. "We're getting tired of coming to Washington and begging them not to cut us, and then thanking them for freezing us."

Congress has a history of coming up with last-minute fixes for the fee problem, but "we shouldn't have to go through this every year," commented Dr. Kim Allan Williams, director of nuclear cardiology at the University of Chicago and a member of the American College of Cardiology's Medicare committee.

At press time, the Senate Finance Committee was putting together a bill that would address the physician pay cuts, said ACP's Mr. Doherty.

Lawmakers hoping to address the cuts--and many were motivated to do so--were facing an uphill battle against time and multiple competing legislative demands, he added.

BY ALICIA AULT

Associate Editor, Practice Trends