Fix to pay formula ranks second to drug benefit. (Bush Administration's Plans for Medicare).

WASHINGTON -- On the Bush administration's priority list for health care, fixing the physician payment formula ranks below instituting a Medicare prescription drug benefit and helping the uninsured, a senior administration official said last month during a meeting on Medicare and Medicaid sponsored by the American Association of Health Plans.

Congress clearly wants to fix the flawed formula, "and I'm optimistic that they will," said Tom Scully, administrator of the Centers for Medicare and Medicaid Services. But "the number one goal is to get a prescription drug benefit to seniors." Making fixes to Medicare Plus Choice is another big priority for CMS, he said.

Congress shouldn't go overboard in increasing Medicare reimbursements to providers, Mr. Scully said, though he admitted that the physician payment formula is "screwed up."

A flaw in the formula resulted in a 5.4% pay cut in 2002, and unless it's fixed, physicians will experience another 4.4% pay cut next year--which may result in more physicians turning away Medicare patients.

In an online survey of its members, the American Medical Association found that 24% of physicians have either placed limits on the number of Medicare patients they treat or plan to issue limits in the next 6 months, due to the Medicare cuts.

The AMA and other medical groups support a Medicare bill (H.R. 4954) approved by the House of Representatives this summer that would increase payments by 2% in 2003 and approximately 3% in 2004-2005.

All eyes are now on the Senate, which failed to deliver on a Medicare reform bill before the August recess.