Psychiatrists Face 5 Percent Medicare Reimbursement Cut

The government announced late last month that it would cut Medicare payments to physicians across the board by 4.5 percent, with psychiatrists headed for a 5 percent average reduction in fees.

According to the Centers for Medicare and Medicaid Services (CMS), Medicare is expected to pay approximately $48.8 billion to 900,000 physicians and medical professionals for services paid under the fee schedule for calendar year 2004. This figure is up from a projected $48 billion in 2003, CMS said.

The physician fee schedule is updated on an annual basis according to a formula that enables CMS to adjust the update up or down depending on how actual expenditures compare with a target rate, called the sustainable growth rate (SGR). The SGR, in turn, is calculated based on medical inflation, the projected growth in the domestic economy, increases in the number of beneficiaries in fee-for-service Medicare, and changes in law or regulation.

Announcing the new fee schedule, CMS said that in 2002 the number of services that physicians provided grew dramatically. “The result is an update for 2004 of negative 4.5 percent, though actual spending will rise 1.7 percent,” according to CMS.

The 4.5 percent reduction in fees is an average across all specialties, with a few specialties experiencing as much as a 7 percent average reduction, and others experiencing as little as 3 percent. Psychiatry will face an average of a 5 percent reduction in fees, according to CMS.

Physician fees, and those for different specialties, are determined annually by a labyrinthine equation known as the Resource-Based Relative Value Scale (RBRVS). Developed in the 1980s by Harvard economist William Hsaio, the RBRVS was intended to be a data-driven method for determining the value of a physician’s work in every type of medical encounter for which a reimbursement code exists (Psychiatric News, April 18).

The rule, which was published on November 7 and is due to go into effect on January 1, 2004, is rousing vociferous protest from APA and the AMA.

“APA, working closely with the AMA and all of medicine, continues to lobby Congress on the impact further payment reductions will have on physicians and patients,” according to a statement released by APA’s Division of Government Relations. “Congress must continue to hear from constituents on this issue.”

APA is urging members to contact senators and representatives and urge them to oppose further reductions in Medicare fees. APA has also established a toll-free line for members to contact representatives in Congress.

The number, (866) 727-4894, will connect callers to the Capitol switchboard. Once connected to the operator, callers may request to be transferred to their representative or one of their senators.

APA has requested members to deliver the following message: “As a psychiatric physician and on behalf of the patients I serve, please pass legislation to stop any further Medicare physician payment cuts.”

The AMA, in its response to the final rule, noted that a provision in the House Medicare prescription drug halts Medicare payment cuts in 2004 and 2005, replacing them with payment increases of at least 1.5 percent in those two years.

“Our message to Congress is simple,” said AMA President Donald Palmisano, M.D. “Pass the prescription drug bill with the House provision that halts Medicare payment cuts. This will help provide prescription drug coverage seniors need, and make sure patients can see a doctor when they need one.”

CMS Administrator Thomas Scully acknowledged the pending House Medicare reform bill that would adjust the 2004 payments, but said that until the bill is passed, the government has “no option other than to base this final rule on the current law.”

He added, “If Congress does pass legislation improving payments to physicians, CMS will implement the new payment rates as quickly as possible.”

Palmisano called the new fee cut “an outrage” and added that “we are already seeing clear signs that Medicare patients are finding it more difficult to get appointments with physicians, as many physicians are being forced to limit the number of Medicare patients in their practices.”

Noting that payment rates for physicians in the military’s TRICARE program are tied to Medicare payment rates, Palmisano said the new cuts would hurt military retirees and families of active duty personnel.

“Our seniors and military families deserve better,” Palmisano said. “Patients need a strong Medicare bill signed into law for the good of America’s seniors, disabled, and military families.”

The complicated method by which payment rates are set has been the source of intense criticism from medical groups, with the AMA urging that the method be scrapped entirely.

In a statement announcing the new fee schedule for 2004, CMS said it is adopting several changes including revision of the Medicare Economic Index (MEI), which measures inflation in physician practice costs and general wage levels. The MEI is one of the key components used to update physician payment rates.

“To address concerns about rising premiums for professional liability (or medical malpractice) coverage, the MEI revisions will increase the weight given to the costs of the coverage,” CMS said. “In addition, CMS will adjust the proportion of Medicare payments attributable to physician work, practice expense, and professional liability insurance to match their weights in the MEI. . . .CMS is also revising the geographic factors that adjust payments to reflect the cost of malpractice insurance to better reimburse physicians affected by local market changes in insurance premiums.”

CMS Administrator Scully said that while CMS is committed to reforming the way Medicare pays physicians for the administration of drugs, as well as for the drugs themselves, the new rule does not address these issues.

Congress is considering legislation that would reform the Medicare Part B drug payment system—especially the use of “average wholesale price” (AWP) to fix payment rates for the limited outpatient drugs now covered by Medicare (see page 6).

“CMS is engaged in that legislative activity, which we expect to produce significant reform that we will swiftly implement,” Scully said.

More information on the Medicare physician fee schedule for 2004 is posted on the Web at http://cms.hhs.gov/regulations/pfs/2004fc/default.asp. ▪