Medicare pay boost iffy under budget plan

Lawmakers consider attaching pay-for-performance initiative to any physician payment increase.

By David Glendinning — Posted April 4, 2005

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Washington -- The annual budget-writing process on Capitol Hill got off to a rough start in March, potentially complicating physicians' efforts to secure a Medicare rate increase next year.

The $2.6 trillion fiscal year 2006 budget resolutions passed by the House and Senate contain widely varying amounts of proposed reductions in entitlement spending, which includes Medicare, Medicaid and other programs. The House measure calls for slashing roughly $69 billion over five years, while the Senate measure calls for $17 billion in cuts.

Negotiators from both chambers now will attempt to work out a compromise resolution, which would serve as a blueprint for appropriators who must draft spending bills by the end of the fiscal year that fill in the funding details. Budget rules make it difficult for these lawmakers to exceed the targets set in the resolution.

Any final product that the two bodies produce would be expected to include some level of health spending cuts, according to congressional aides. The two House committees that have jurisdiction over Medicare and Medicaid, for instance, are instructed to carve out a total of nearly $40 billion over five years from all of the programs under their purview.

While most of the money is expected to come from Medicaid, a smaller amount of Medicare funding also could be on the chopping block. This would mean that any increase in 2006 Medicare physician pay would have to come from further cuts to other parts of the program, unless lawmakers garnered enough votes to relax budgetary rules. Experts estimate that converting next year's projected 5.2% cut into the same 1.5% increase that physicians have received the past two years would cost about $11 billion over five years.

The AMA is fighting to replace the physician pay formula and supports the Medicare Payment Advisory Commission's recommendation of a roughly 2.7% boost in 2006.

But Congress might not end up with a budget blueprint at all this year. The vastly differing spending targets proposed by the two chambers have negotiators on both sides predicting a lengthy and contentious debate.

A bipartisan group of senators already has made it clear that it will oppose deep cuts to federal health care programs. By a vote of 52-48, lawmakers led by Sen. Gordon Smith (R, Ore.) stripped out language in the original Senate budget resolution that would have instructed the Senate Finance Committee to draft $15 billion in spending reductions over five years, mostly from Medicaid.

In addition to facing an unpredictable budgetary environment, advocates lobbying for a physician pay increase are feeling congressional pressure aimed at implementing pay-for-performance within Medicare. Rep. Nancy Johnson (R, Conn.), chair of the House Ways and Means health subcommittee, suggested at a recent hearing that lawmakers might attach a pay-for-performance initiative to any physician reimbursement fix.

"It is time to examine the quality and efficiency of care delivered to our seniors under Medicare and to begin to develop a system to reward providers differentially based on that quality," Johnson said. She noted that MedPAC has proposed a system in which 1% to 2% of payments would be redistributed to the top performing doctors in the program.

But the AMA and other physician groups have expressed some concern about the MedPAC plan, which would not commit any additional funding to Medicare. Such an initiative could punish doctors who cannot afford to make investments in the information technology needed to report their quality care progress to the federal government, they said.

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