CMS finalizes 1.5% doctor pay increase, adds new patient benefits

Medicare expenditures on physicians are expected to rise 4% next year. More money for cancer treatments and physicals is on the way.

By David Glendinning — Posted Nov. 22, 2004

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Washington -- Total Medicare spending on physician services is in line to increase by more than $2 billion in 2005, federal officials said.

The Centers for Medicare & Medicaid Services announced the projected boost in conjunction with the release of the agency's final physician payment rule. Thanks in part to a congressionally mandated 1.5% reimbursement raise for doctors, CMS expects that aggregate spending under the new fee schedule will increase 4%, from $53.1 billion to $55.3 billion.

Other contributing factors include an expected uptick in beneficiaries' use of Medicare services and the addition of new benefits that Congress approved last year.

Starting in January, beneficiaries entering the program for the first time can receive a subsidized "Welcome to Medicare" physical. New coverage for tests that screen for heart disease and diabetes help round out a package of preventive services that CMS says will decrease health costs in the long run.

Responding to comments on its proposed payment rule issued last summer, CMS decided to dedicate more funding to the new physicals. Doctors will receive separate payments for the screening electrocardiogram and the initial physical. In addition, physicians who determine that a patient needs more medical attention the same day as the physical can bill Medicare for a more extensive office visit.

But with additional or expanded benefits comes the potential for more spending on physician services in the short run. The American Medical Association remains concerned that the benefits, if improperly accounted for by CMS, could cause total spending on doctors to exceed the sustainable growth rate limit for the year and result in more severe rate cuts in the future. This would hit doctors hard, given that projected medical inflation for next year already exceeds the 2005 rate update by more than 1%.

"Such increased spending will occur due to the fact that new or increased benefits will trigger physician office visits, which in turn may trigger an array of other medically necessary services, including laboratory tests, to monitor or treat conditions that might have otherwise gone undetected and untreated," wrote AMA Executive Vice President Michael D. Maves, MD, in comments on the proposed rule. "All of these costs should be included in the calculation of the SGR target."

Complicating the matter is CMS' continued refusal to remove the costs of physician-administered drugs from the rate formula or to account for costs stemming from coverage approvals for new treatments and technologies. Doctors believe that they should be held harmless from the increased spending that stems from drug price hikes and federal coverage decisions, over which they have no control.

"The AMA had hoped that the administration would act in this rule to separate drugs from actual physician services in its physician payment calculations and will continue to work vigorously to achieve this policy change before the 2006 fee schedule is released," said AMA President John C. Nelson, MD, MPH.

But the agency insists that such a move would have no effect on several consecutive 5% reductions that are expected to hit doctors starting in a little over a year.

"We note that administrative changes affecting the SGR would have significant long-term cost implications but will not have an impact on the update for 2006 or the subsequent few years," CMS states in the final rule. "Therefore, without a statutory change, there will still be a reduction in physicians' fee schedule rates for 2006 and subsequent years."

The AMA plans to work with both Congress and the Bush administration to address the perceived flaws in the physician reimbursement formula and head off the projected cuts.

Better news for oncologists

Next year is starting to look better for oncologists, who have been expecting major reductions in federal payments under Medicare's new system for calculating cancer drug payments.

Changes that CMS made since unveiling the proposed rule will scale back a projected decline in 2005 payments to cancer doctors from $500 million to $200 million, according to the American Society of Clinical Oncology. If utilization of drugs and services goes up as CMS expects, the physicians actually could expect to see their total Medicare payments increase by 8% next year.

"While ASCO is in the process of analyzing the full effects of the rule, this appears to be another step forward in preserving patient access," said David H. Johnson, MD, president of the society.

CMS adopted recommendations from AMA panels aimed at reimbursing more equitably for the administration of drugs. Doctors will be able to bill for 18 new drug administration codes developed by the AMA CPT Editorial Panel.

The adjustments go beyond the realm of oncology. The new rule also includes recommendations from the AMA Drug Administration Workgroup regarding vaccinations and other injections that doctors give in the office. As a result, payment for administering the flu vaccine will increase from $8 to $18 starting in January.

On the oncology front, CMS also has established a one-year demonstration project that will provide doctors with an additional $130 per chemotherapy recipient per treatment day in return for submitting information about the patient's level of nausea, pain and fatigue.

The project, which applies to physicians administering chemotherapy through an intravenous infusion or push, will cost $300 million.

Oncologists also have a better idea about how much Medicare will reimburse them for drugs next year. CMS released projected 2005 rates based on second-quarter pricing for most of the drugs that cancer doctors prescribe. While the final rates will be based on third-quarter data that federal officials are still processing, CMS Administrator Mark McClellan, MD, PhD, said there likely will be no major price changes to announce when the work is completed.

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Getting physical

Starting in January, Medicare will begin covering the following preventive health services for the first time. Some of the new benefits will be administered through a subsidized physical exam for new enrollees.

  • Height, weight and blood pressure measurements
  • Vision and hearing tests
  • Problem drinking and depression screenings
  • Smoking cessation and injury prevention services
  • Glucose tests for diabetes-risk patients*
  • Cholesterol measurements*

*Covered separately from the initial physical

Source: Centers for Medicare & Medicaid Services

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