In one of its last actions, the 109th Congress approved a sweeping tax and health bill that included a 1-year delay in the scheduled cut in physician fees under the federal Medicare program.
This year, physicians were due to see a 5% reduction in pay, thanks to targets set by a payment formula known as the Sustainable Growth Rate (SGR). However, under the package agreed upon by the House and Senate in mid-December, physician payments will instead be frozen at 2006 rates.
The fee freeze was included in H.R. 6111, The Tax Relief and Health Care Act of 2006, which was signed into law by President Bush.
When the pay fix is combined with updates in evaluation and management codes announced by the Centers for Medicare and Medicaid Services (CMS), some physicians will actually see a pay increase this year. In addition, physicians will receive a 1.5% bonus if they meet certain quality reporting requirements.
Family physicians and internists are expecting an average 5% increase. That increase takes into account both the fee freeze and the new Evaluation and Management (E&M) rules, which, for instance, increase pay for a mid-level office visit by about $7, or 12%.
“That is the bread and butter code of internal medicine,” said Robert Doherty, a senior vice president for governmental affairs and public policy at the American College of Physicians, in an interview.
While ACP is happy that the cuts mandated by the SGR were averted and that E&M pay is being increased, the organization is still lobbying for a new way to calculate how physicians are paid under Medicare, said Mr. Doherty.
ACP is not alone. Nearly every professional society, a majority of Senators and House members, and many academic experts agree that the SGR needs to be replaced. If nothing is done this year, physicians may be looking at reductions of 5%–10% in 2008.
The 2008 cut was at least partially offset by Congress in the tax package. The legislators set aside $1.35 billion from the Medicare Advantage program and applied it toward 2008 payments to physicians.
Physician groups say the Democratic takeover of Congress will not add any special impetus to SGR replacement drive.
“We have not found anyone in Congress who does not agree that this formula is perverse,” said Dr. Cecil Wilson, board chair of the American Medical Association, in an interview. “The difficulty Congress has had is to find the money to do it.”
Mr. Doherty agrees that money is the issue, not politics. Democrats, however, tend to be more concerned with the impact any SGR fix will have on beneficiaries' out-of-pocket costs, he said. Even so, “I fully expect that they will make a valiant effort to find a way out of this,” said Mr. Doherty.
Physicians registered another victory with the Tax and Health Care Relief Act. Legislators directed the Health and Human Services department to establish a Medicare “Medical Home Demonstration Project.” The program was developed and espoused by the ACP and the American Association of Family Physicians.
The 3-year pilot will take place in eight states. Physicians in practices of any size will be eligible to receive a payment for coordinating care for people with chronic illness. If they meet certain criteria, they will also get 80% of the savings if a hospitalization is avoided.
“Even though it's just a pilot, it creates a foundation for a fundamental revamping of Medicare payment policy,” Mr. Doherty said. The Medicare Payment Advisory Commission (MedPAC) has been deliberating on a potential permanent SGR replacement.
At its December meeting, MedPAC staff member Kevin Hayes presented a plan he developed in conjunction with MedPAC Chairman Glenn Hackbarth. Initially, the SGR would be kept, but physicians would be paid bonuses for high performance.
In the second phase, the SGR would be replaced with a payment formula that uses targets and payments based on regional or statewide data, not national data. All of Medicare—hospitals, pharmaceuticals, home health—not just physicians, would be included in the targets. Physicians would be rewarded or penalized based on efficiency. Opportunities to share in savings would come later.
“We are talking realistically about a process that would unfold over a period of years, and I'm thinking more like 5 or 10 years as opposed to next year,” Mr. Hackbarth said, noting that not all the MedPAC commissioners were convinced that the SGR should be replaced or that this phase in was the best way to go. “I don't think there is unanimous agreement on any of these things, let alone on all of the pieces,” he said.