Medicare pay cut adjustment called inadequate. (Physicians Want Broader Fix).

WASHINGTON -- A proposal from the Centers for Medicare and Medicaid Services to cushion the blow of anticipated Medicare pay cuts doesn't provide the broad-scale fix that physician groups are seeking.

In its proposed 2003 physician fee schedule, CMS announced that it would increase the Medicare Economic Index (MEI), which helps adjust the fee schedule for inflation in medical practice costs, from 2.3% to 3%. If the fee schedule goes into effect, CMS estimates that physicians would experience a 4.4% reduction in Medicare reimbursement in 2003, instead of the projected 5.1% reduction.

The change would restore more than $1 billion in Medicare payments from 2003 to 2005, the agency says.

Although the revision is a "positive change," CMS did not do everything it could to mitigate projected cuts to physicians, Dr. Timothy Flaherty, trustee to the American Medical Association said in a statement.

The Medicare Economic Index is just one element of the Sustainable Growth Rate (SGR), which is used to calculate Medicare's physician payment formula. Errors that were made in the SGR for 1998 and 1999 led to a 5.4% drop in Medicare physician payments in 2002. If left as is, the SGR is expected to cut physician reimbursements by nearly 20% over the next 3 years.

CMS has been telling frustrated physicians for months that a full-scale overhaul of the payment formula requires congressional action. That's still true, a CMS spokeswoman told this newspaper in an interview.

However, a legal opinion commissioned by the AMA and other medical organizations asserts that CMS has the authority to exclude outpatient drugs from the physician-payment equation and correct erroneous estimates of previous ...