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Pay cuts starting in 2006: panel eyes 'black cloud on Medicare's horizon'.(Practice Trends)

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| June 01, 2004 | Reichard, John | COPYRIGHT 2004 International Medical News Group. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

WASHINGTON -- Last year's Medicare reform legislation forestalled cuts to the physician fee schedule for the next couple of years, but starting in 2006, doctors are in line for 5% annual cuts in payment for the following 6 years.

At a recent hearing of the House Energy and Commerce Health Subcommittee, lawmakers began to focus on what subcommittee vice chairman Rep. Charlie Norwood (R-Ga.) called "the black cloud on Medicare's horizon," with testimony suggesting the need to focus on new ways to control the volume of physician services.

The volume and intensity of physician services is "the hidden culprit" in Medicare physician spending, Bruce Steinwald of the General Accounting Office testified. Since 1998, Medicare yearly spending per beneficiary on physician care has outpaced medical inflation or the percentage increase in physician payment because of increases in the volume and intensity of physician services, Mr. Steinwald said at the hearing.

How to control volume and intensity? The Medicare Payment Advisory Commission (MedPAC) has advocated repealing a key part of the current statutory mechanism, the Sustainable Growth Rate (SGR). The commission says that the SGR can threaten access to quality care by disconnecting payment from the cost of producing services, that it provides no incentive to individual physicians to control volume, and that it is inequitable because it treats all specialties alike regardless of whether they contributed to overuse of services.

But repealing the SGR, which produces payment updates too high in some years and too low in others, is "prohibitively expensive," MedPAC Chairman Glenn Hackbarth testified.

The commission is urging that the payment update in 2005 be set at the change in input prices for delivering care minus an adjustment for productivity. That approach has been endorsed in nonbinding "Sense of the Senate" language that is part of the pending Senate budget resolution, Congressional Budget Office Director Douglas Holtz-Eakin noted in his testimony.

But that approach is costly, too. "Such updates would increase Medicare spending by about $95 billion ...

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