Medicare Change Likely to Affect Future Physician Payments

The federal Centers for Medicare and Medicaid Services (CMS) is proposing to remove physician-administered drugs from the definition of “physician services” for purposes of computing physician payment in the Medicare program for 2010.

The proposal will not change the projected update for services in 2010—which forecasts an overall average decrease of 21.5 percent in physician payment (see Physicians Face Prospect of Large Medicare Payment Cuts)—but CMS says that it would reduce the number of years into the future in which physicians are projected to experience a negative update, that is, a decrease in payment.

The proposal was published in the Federal Register on July 13 as part of the proposed rule on the Medicare physician fee schedule.

Removing physician-administered drugs would eliminate one element that adds to the cost of physician services and helps push the cost of those services over annual spending targets. (Under the Medicare payment formula, physician pay is reduced across the board when spending on all physician services exceeds annual targets.)

Conceivably, the move also could make it more affordable for Congress to reverse the 21.5 percent cut and the additional future reductions mandated by the Medicare formula, because the five-year cost of legislating such a change would also be reduced.

For this reason, removal of physician-administered drugs from the payment formula is a step for which the AMA has been advocating for several years. In the midst of an otherwise bleak picture for physician payment under the federal program, the AMA seized on the announcement by CMS as evidence that the Obama administration was serious about reforming the Medicare physician payment system.

“The removal of physician-administered drugs from the broken Medicare physician payment formula is a major victory for America's seniors and their physicians,” said AMA President J. James Rohack, M.D., in a statement released by the AMA. “The AMA has been calling for this action since 2002 so that Congress can afford to repeal the flawed Medicare physician payment formula. We are very pleased that the Obama administration agrees with the AMA that drugs do not belong in the physician payment formula.

“President Obama, HHS Secretary [Kathleen] Sebelius, and White House Health Reform Director [Nancy-Ann] DeParle clearly understand that fixing the Medicare payment formula once and for all is fundamental to comprehensive health reform,” Rohack said.

“Our nation has a historic opportunity for health reform this year, and strengthening Medicare should be a cornerstone of this effort. Without congressional action, Medicare will impose a steep cut to physician payment rates in 2010. Physicians will not be able to continue to treat all seniors, let alone make quality improvements to their practices, if the cuts occur. Instead of yet another band-aid fix, today's action paves the way for Congress to ensure stable payment rates that reflect increasing medical practice costs and preserve seniors' access to care.”

The proposed rule published in the July 13 Federal Register is posted at<http://edocket.access.gpo.gov/2009/E9-15835.htm>.▪