Medicare Physician Pay Patch Bill Could Result In 20% Fee Reductions In 2010; Permanent Solution Costly

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Primary Care / General Practice
Article Date: 15 Jul 2008 - 11:00 PDT

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Legislation (HR 6331) that would delay a 10.6% reduction to Medicare physician fees, scheduled to take effect on July 1, could lead to a reduction to physician fees of more than 20% in 2010 unless a long-term solution is found, the New York Times reports.

Although the recently passed bill would delay a reduction to physician fees for 18 months, it would not alter the Medicare payment formula that Congress established in 1997. CMS sets payment rates for 7,000 different services under Medicare once annually, using a "complex formula" that sets goals for spending on physician services based on the annual gross domestic product. Under the plan, payments are reduced if actual spending exceeds the goals. When Congress passes a bill to delay those reductions, Medicare is directed to recoup the funds by making larger reductions in future years.

Some physicians say the formula works well "when the economy is booming," according to the Times. The formula treats all physicians equally, regardless whether they keep beneficiaries in good health or control spending. The formula also does not establish appropriate and inappropriate increases in services or mandate which services can be done in physicians' offices instead of hospitals. Lawmakers from both parties agree the policy is "broken," according to the Times.

Many physicians want the formula eliminated because they say their costs are rising faster than the rate of fee increases. However, the Congressional Budget Office found that if Congress based physician fee increases on the rate of medical inflation, it would cost $65 billion over the first five years and another $200 billion over the ensuing five years. Health policy experts and lawmakers say that if the issue remains unresolved, it "will come back to haunt" the next president and Congress, the Times reports (Pear, New York Times, 7/13).

Interests Continue Lobbying
AARP and America's Health Insurance Plans are actively pursuing their goals related to the recently passed Medicare legislation because President Bush has vowed to veto it, The Hill reports (Young, The Hill, 7/13). The Bush administration opposes the bill because it would make cuts to Medicare Advantage, which it believes would reduce choices for beneficiaries, according to the Chicago Tribune (Graham, "Triage," Chicago Tribune, 7/11). AARP in a letter asked Bush to reconsider vetoing the measure. The group also forwarded 45,000 e-mails from members and proponents of the legislation to the White House. AARP plans to run advertisements supporting an override vote should Bush veto the bill. It will also encourage beneficiaries to visit lawmakers' offices and organize a letter-writing and telephone campaign.

AHIP is attempting to convince lawmakers to change their vote on the legislation if an override vote occurs because they believe the measure will reduce access to plans under MA (The Hill, 7/13). CBO last week said that as many as 2.3 million beneficiaries could leave MA if the bill becomes law ("Triage," Chicago Tribune, 7/11). AHIP is targeting press releases that project how many beneficiaries will lose access to MA plans if the measure becomes law in states such as Georgia, Pennsylvania and Virginia, the home states of Republican senators who originally opposed the measure but changed their votes last week, according to The Hill.

The Hill reports that "the campaigns by the AARP, AHIP and others may be moot." If Bush vetoes the measure, House and Senate leadership say the chambers will quickly hold veto-override votes. Sixty-five representatives or three senators would have to change their positions and vote against a veto override for the measure to fail. Eight of nine Republican senators who changed their votes last week and approved the bill have said they would vote for a veto override, according to The Hill. The remaining vote, Sen. Lamar Alexander (R-Tenn.), has not disclosed whether he would vote for or against an override. Sen. Kit Bond (R-Mo.), who voted against the bill, also said he would vote for an override (The Hill, 7/13).

Bidding Program
The legislation to delay physician fee reductions also would have implications for suppliers of durable medical equipment under Medicare, CQ Today reports. It would delay for 18 months a competitive bidding pilot program that went into effect in 10 of the largest Metropolitan Statistical Areas on July 1. It also would cancel contracts awarded to about 325 companies out of more than 1,000 that submitted bids.

According to CQ Today, some of the contract winners are preparing to cut back expansions that were made to fulfill the new contracts and some are contemplating bringing legal action if the program is rolled back and delayed. Jeffrey Holman -- president of First Priority Medical Services, one contract winner -- said that companies might have little legal recourse if the program is rolled back because the contracts specified that they were "subject to changes in regulation and law." He said that companies losing the awarded contracts might only be given reparation if CMS chooses to do so.

Holman also said that the program likely will help fight fraud discovered in the system and that if the program is rolled back, providers that take part in such schemes would be allowed back into the system. "They just let all the bad guys right back in the business," Holman said. The Government Accountability Office has found that more than 10% of Medicare payments annually to DME suppliers are "improper," according to CQ Today (Wayne, CQ Today, 7/11).

Private Fee-for-Service Networks
The legislation also would require so-called private fee-for-service plans under MA to establish provider networks, Florida Health News reports. The plans are the fastest growing and highest paid of all offerings in MA. Although just 1.7 million of the 44 million U.S. residents under Medicare are enrolled in fee-for-service plans, such plans have grown eightfold over the last two years, according to the Medicare Payment Advisory Commission. The plans would have until 2011 to establish the networks under the bill. Current Medicare law does not have such a requirement, which often makes it difficult for many beneficiaries to find a provider within a reasonable distance of their home, according to Florida Health News (Jaffe, Florida Health News, 7/11).

Bush Administration
The Washington Post on Sunday reported that while Bush has recently been "engaging in the kind of conciliation with opponents that his administration has often avoided," his "willingness to compromise remains limited" and he continues to threaten to veto the Medicare legislation.

The Medicare bill had support from 18 Republicans in the Senate and many Republicans in the House. According to the Post, "Even two of Bush's staunchest Senate allies," Texas Sens. John Cornyn and Kay Bailey Hutchinson, "abandoned him and switched sides." White House spokesperson Tony Fratto said that any perceived change has more to do with a change in the political climate than a change in White House strategy (Eggen/Kane, Washington Post, 7/13).

SCHIP Expansion
With the Democrats' "big win" on Medicare, a House Democratic leadership aide said that the issue of SCHIP expansion might be brought up in Congress again, the Wall Street Journal reports. The aide said there is a "strong possibility" that there will be a new vote on expanding the program. However, the "broad backing for the Medicare bill may not translate to SCHIP," according to the Journal. Last year, there were not enough votes in Congress to override a veto of legislation that would have expanded the program (Goldstein, "Health Blog," Wall Street Journal, 7/11).

Opinion
Two newspapers published an editorial and a letter to the editor related to the Medicare bill. Summaries appear below.

• New York Times: The debate over the Medicare bill has "underscored a disturbing truth: many of the private plans that participate in" MA "have become a far too costly drain on Medicare's overstretched budget," the Times writes in an editorial. The editorial continues, "Private health plans were promoted in the 1980s and 1990s in the belief that they could reduce costs and improve care through better management," and "for a while, they did." However, "policy changes" by the Bush administration and the formerly Republican-controlled Congress "led to exactly the opposite outcome," according to the Times. The Times writes, "The Democrats in Congress, and the Republicans who dared to join them, deserve thanks for removing part of the subsidy." The editorial concludes, "Bush should drop his veto threat and adopt the principle that Medicare should pay the same amount for all beneficiaries" (New York Times, 7/14).
  
  
• Tyler Wilson, Wall Street Journal: HHS Secretary Mike Leavitt "fails to mention the problems with the [Medicare DME] bidding program" when "leading the effort to retain" it, American Association for Homecare President and CEO Wilson writes in a Journal letter to the editor. Leavitt compares "prices of medical equipment from licensed providers to equipment obtained on the Internet," which "comes without 24-hour support, patient/caregiver education, accreditation, state licensing or quality control," Wilson writes. In addition, Wilson writes that Leavitt "did not mention that the bidding program has loopholes allowing unlicensed companies to provide sensitive equipment" and "has awarded contracts to companies located miles away from the service area to provide equipment they have rarely or never previously provided." Wilson concludes, "Congress should put this program on hold until we can be assured that Medicare beneficiaries will be treated with dignity once again" (Wilson, Wall Street Journal, 7/14).
  

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