MedPAC calls for 2.5% doctor pay update in 2005

But Congress is not expected to increase physician reimbursement beyond the 1.5% provided in the Medicare reform law.

By Markian Hawryluk — Posted Feb. 2, 2004

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Washington -- Medicare payments to physicians may fall short of what is needed to maintain adequate access to physician services next year, according to a congressional advisory panel.

The Medicare Payment Advisory Commission voted unanimously to recommend a 2.5% update for physicians in 2005. The recommendation will be included in the panel's March report to Congress.

Physicians are scheduled to receive no less than a 1.5% update in 2005 under current law. If MedPAC's recommendation were to be implemented, it would tack $200 million to $600 million onto the cost of next year's update next.

But after spending more than $60 billion to turn anticipated physician payment cuts for 2003 and 2004 into reimbursement increases, Congress is unlikely to support allocating more money to give doctors a bigger Medicare raise than 1.5% next year. House Republican staff indicate that they do not expect to pursue any significant Medicare payment changes.

The MedPAC recommendation follows an update methodology adopted by the panel in recent years. That approach considers the current adequacy of payments. If payment levels are deemed adequate, the update is set to reflect the likely change in the cost of products and services used by physicians minus an adjustment for increased productivity.

The Centers for Medicare & Medicaid Services has estimated that the prices of goods and services used by physicians will increase 3.4% in 2005. Productivity growth -- an estimate used to calculate the degree to which physicians can maintain their income by becoming more efficient -- was estimated at 0.9%.

Using those two numbers, MedPAC arrived at its recommendation that physician reimbursement should rise 2.5% next year. The group deemed that current payments are adequate and, therefore, no other adjustments to the 2005 update recommendation were necessary.

MedPAC based its assessment of payment adequacy on research showing little evidence of widespread physician access problems among Medicare beneficiaries. The group is awaiting results from a 2003 CMS survey that studied beneficiary access in areas considered likely to have problems.

"Survey data from 2002 and 2003 indicate that on a national level, beneficiaries have good access to physicians, and most beneficiaries are able to find a new physician and schedule timely appointments," said MedPAC analyst Cristina Boccuti. "A small share of beneficiaries report that they experience difficulties getting appointments and finding physicians."

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