House wants administration buy-in to Medicare pay fix

Republicans on the House Ways and Means Committee renew their call for Medicare regulators to take a role in reversing physician cuts.

By David Glendinning — Posted Aug. 1, 2005

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Washington -- Congress has accepted the fact that it needs to scrounge up a large chunk of money to repair Medicare physician pay, but some lawmakers say the Bush administration must put in its fair share, too.

House Ways and Means Committee Chair Bill Thomas (R, Calif.) and Health Subcommittee Chair Nancy Johnson (R, Conn.) for more than a year have been calling on Medicare officials to pursue administrative changes that could take some of the budgetary pressure off Capitol Hill. If left unchanged, the physician formula would cumulatively cut doctors' reimbursements by more than 25% over the next six years.

Thomas and Johnson reiterated their belief that the administration must chip in to restore these payments in a pointed letter that they recently sent to Centers for Medicare & Medicaid Services Administrator Mark McClellan, MD, PhD.

"A permanent legislative fix to the [physician payment] formula would be prohibitively expensive given current interpretations of the formula but could proceed through our joint efforts combining administrative and legislative actions," they stated.

The belief that CMS has an important role to play in this process is grounded in the assertion that the agency determines physicians' payments by accounting too much for some medical services and not enough for others.

On one end, biologics and physician-administered drugs such as chemotherapy treatments are not reimbursed through the physician fee schedule but nevertheless register as doctors' services, Thomas and Johnson wrote. The disconnect artificially drives physician expenditures above predetermined annual limits and triggers Medicare rate cuts in future years, they said.

Medicare drugs

The government can free up a large amount of money by taking Medicare physician-administered drugs out of the picture and making the change retroactive, the letter said. Those freed-up dollars then could be used to help fix the physician formula.

"We believe that CMS has the authority to revise the definition of physician services to exclude drugs," the lawmakers said. "Furthermore, we believe that CMS has the authority to revise its previous calculations of actual expenditures by removing the costs of prescription drugs and to do so back to [1996] using this revised definition."

Conversely, when CMS officials decide to expand coverage of certain existing Medicare services and technologies, the agency does not adjust its spending limits upward even though costs are expected to take off as a result, they stated. This policy applies even when larger populations of patients become eligible to receive coverage for expensive treatments such as carotid artery stenting, positron emission tomography and cochlear implants.

Subsequently, the coverage expansion process also increases the chances that physicians will see cuts under the formula.

The American Medical Association, which long has supported the call for CMS to make these changes, hailed the lawmakers' new attempt to elicit a response from the agency.

The Thomas-Johnson letter "highlights improvements the administration can make to the current Medicare payment formula," said AMA President J. Edward Hill, MD. "Removing prescription drug costs from the payment formula and taking into account the cost of new and expanded patient benefits will reduce the cost of permanently replacing the physician payment formula with one that accurately reflects the cost of patient care."

But despite the lawmakers' call for a prompt response from Dr. McClellan, the agency was not rushing to weigh in on the matter. At press time, CMS officials said that they were continuing to review whether the Medicare statute even allows the agency to make such sweeping changes in physician-administered drugs and coverage expansions -- a position that they have held for more than a year.

The potential dollar amount involved in such a move is significant. The Congressional Budget Office estimates that removing drugs from the physician pay formula alone would restore more than $100 billion to the system over a decade -- and take much of the pressure off Congress to find all of the money.

Medicare Payment Advisory Commission Chair Glenn Hackbarth said the standoff between Congress and CMS had been perpetuated because of a reluctance on both sides to do all of the heavy lifting when it comes to paying for a physician rate fix. At the end of the debate, however, all of the money would effectively come out of the same taxpayer-funded pot, he said.

The renewed push by the Ways and Means Committee lawmakers to engage CMS took place as Johnson was to convene a health subcommittee hearing on physician pay-for-performance, a concept that she referenced in her letter as another compelling motivation for Bush administration action on reimbursement policy.

Current CMS policy "leads to future unsustainable payment rate cuts," the letter stated. "Furthermore, we believe that the time is right to tie physician payments to quality performance -- a position that we know you share."

Dr. McClellan and AMA Trustee John Armstrong, MD, both planned to testify before Johnson's committee at the pay-for-performance hearing.

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