CMS held able to fix Medicare payment errors. (Expert Legal Opinion).

WASHINGTON -- Medicare has the legal authority to correct errors in its physician payment formula without congressional intervention, health care law expert Terry Coleman said at a press briefing sponsored by the American Medical Association.

The conclusion supports a March recommendation by the House Ways and Means Committee that the Centers for Medicare and Medicaid Services has the statutory authority to change the fee schedule. Errors made in the Sustainable Growth Rate (SGR)--the payment formula--for 1998 and 1999 led to a 5.4% drop in Medicare physician payments in 2002. If left uncorrected, the SGR is expected to cut physician Medicare reimbursements by nearly 20% by 2005.

CMS officials know the calculations are wrong, "but since they've already put them out there, they claim they're unable to go back and fix them," Mr. Coleman, a lawyer in Washington, told this newspaper. The agency specifically maintains that it doesn't have the legal authority to change the formula--because Congress sets the formula. However, the statutory language on calculating physician payments for an upcoming year never refers to estimates before 2000; "it simply refers to the formula." In Coleman's interpretation, this means that CMS should be able to recalculate the SGR for 1998 and 1999.

According to the American Medical Association, these adjustments could return at least $62 billion to the Medicare program to help resolve the physician payment shortfall.

The AMA and 40 other medical organizations commissioned Mr. Coleman's work.

One flaw in the CMS's calculations, according to Mr. Coleman, is the inclusion of outpatient drugs in the payment formula. Drugs are not reimbursed ...