Medicare doctor payments contribute to Part B premium rise

Washington -- The steep rise in next year's Medicare Part B premiums can be tied in part to increased spending on physician services, but it is unclear whether that will factor into future efforts to shore up doctors' reimbursement rates.

Under the Medicare payment formula, physicians' reimbursement was set to sustain large cuts this year and next. But last year Congress passed a measure mandating that rates increase no less than 1.5% through 2005.

"Without Congress' intervention to stop the scheduled cuts in physician payments, Medicare patients' access to physician services would have been in jeopardy," said John C. Nelson, MD, MPH, president of the American Medical Association.

In part due to the increase in doctors' payments and a rise in the volume of physician services, beneficiaries will pay 17.5% more a month for their Part B premiums, the Centers for Medicare & Medicaid Services announced recently. Monthly premiums will be $78.20 next year. The agency uses a formula to calculate premiums as a portion of total Medicare costs.

Physician payments are only one factor of many that are behind the rise in beneficiaries' premiums, said Robert Doherty, senior vice president of governmental affairs and public policy at the American College of Physicians.

An AMA analysis found that together, higher payments to Medicare managed care plans, new preventive benefits and increased spending in Part B services account for about a third of the increased premiums. The need to boost cash reserves in the Part B account of the Medicare Supplementary Medical Insurance Trust Fund is responsible for another third, and physician payments account for about a third.

The 1.5% increase physicians received does not even keep up with practice costs, Dr. Nelson said. In addition, doctors face reimbursement cuts in 2006 and beyond if the Medicare payment formula is not changed.

In announcing the premium increase, CMS officials argued that beneficiaries are paying more for Medicare but also getting more from the program.

"The new premiums reflect an enhanced Medicare that is providing seniors and people with disabilities with strengthened access to physician services and new preventive benefits," said CMS Administrator Mark B. McClellan, MD, PhD, in a statement.

Political scrutiny ahead?

Although it is not yet clear whether physician payments will be subject to budget cutting by Congress, as Medicare spending continues to rise dramatically the possibility that those payments will come under political scrutiny will grow, said Brett Baker, senior associate of regulatory affairs at the ACP.

A new Congressional Budget Office report estimates that Medicare outlays will have grown by 8.1% in 2004 and by a total of 30.6% between 2005 and 2007. Federal Reserve Board Chair Alan Greenspan recently said that those growth rates mean Congress will have little choice but to make cuts to the program in the near future.

Meanwhile, Democrats are making the Medicare premium increase a political issue. In response to the CMS announcement, leading Senate Democrats introduced a bill that would cap premium increases, which Sen. Debbie Stabenow (D, Mich.) said hurt low-income seniors the most.

"Why are senior citizens getting socked?" asked Sen. Edward Kennedy (D, Mass.), who has co-sponsored the bill. "Because President Bush has done nothing to control soaring health care costs and because he values high profits for HMOs and drug companies more than he values senior citizens."

The Democrats also targeted the Medicare reform law as a major contributor to the premium increase.

The proposed premium cap smacks of election-year politics, as the bill has little chance of moving this year because Congress is busy playing catch-up with spending bills, said ACP's Doherty.