Medicare panel recommends 2.8% payment hike for 2007

Washington -- Physicians and their allies in Congress now have something to shoot for when it comes to Medicare reimbursements in 2007.

The Medicare Payment Advisory Commission voted at its January meeting to recommend a 2.8% increase in doctors' payments next year in place of the reduction that they are facing under current law. Congress will officially receive the advice when MedPAC releases its annual payment report in March.

If lawmakers decide to listen to the commission, Medicare would pay physicians an estimated $1.5 billion more next year and as much as an additional $10 billion over the next decade, according to analysts.

The American Medical Association said this funding, which would represent next year's projected increase in practice costs minus a small percentage for expected physician productivity gains, is vital to keeping doors open to senior patients.

"The AMA and MedPAC agree. Medicare reimbursements to physicians must reflect the cost of providing care," said AMA President J. Edward Hill, MD. "We encourage Congress to accept MedPAC's recommendation to update physician payments 2.8% in 2007 to help preserve seniors' access to care."

Although lawmakers are not obligated to take the commission's advice on any of the payment recommendations in its March report, they often use MedPAC's figures as the starting point for budget negotiations that can sometimes last the entire legislative year. Often the annual recommendation also becomes the rallying point for physician lobbyists pushing for rate updates.

But the experience of last year's legislative session demonstrates that this does not always result in the desired outcome for physicians.

After the panel's March 2005 report recommended a 2.7% rate boost for this year in place of the 4.4% cut required by statute, lawmakers introduced legislation in the House and Senate that would have implemented the update. Congress ultimately rejected both measures, however, in favor of a plan to freeze 2006 rates at 2005 levels. The House still needs to approve this freeze in a planned Feb. 1 vote before it can head to the White House for enactment.

Without lawmakers' action, physicians face a similar cut next year. The Medicare trustees' last estimate put the 2007 reduction at 4.6%, but they could update the figure when they release their annual report in March.

Although recent surveys indicate that Medicare beneficiaries' access to doctors remains good, this might not continue for long if doctors sustain multiple years of cuts, MedPAC analyst Cristina Boccuti told the panel.

"The commission is concerned that consecutive annual cuts would threaten beneficiary access to physician services," she said. "The commission is especially concerned about how these cuts might affect access to primary care services."

MedPAC's assertion that the federal government does not pay doctors enough under current law is tempered by the panel's belief that Medicare may be paying too much for some individual physician services.

At the heart of the matter is the AMA's Relative Value Scale Update Committee, which meets every five years to make recommendations on how to set federal prices for individual Medicare services. The group is meeting now to advise changes that could take effect in 2007. MedPAC concluded that another layer of review is needed between the RUC and the Centers for Medicare & Medicaid Services, which often accepts the committee's advice without change.

"Currently, the vast majority of services that are reviewed during the five-year process are identified by physician specialty societies and are likely to be perceived as undervalued rather than overvalued," said MedPAC analyst Dana Kelley.

The Medicare panel's proposed solution to this alleged skewing of prices is to establish an expert panel to review the RUC's work and to allow CMS to better identify services for which it is paying too much. The panel would include experts in health economics and physician payment, as well as clinicians themselves.

MedPAC Chair Glenn Hackbarth said the proposal was not meant either to replace the RUC or to imply that physician specialties are purposely driving up reimbursements for certain doctor services.

"I want it to be absolutely clear that there's no attribution of bad motives, but the process does have certain incentives in it, and I see this as a way of dealing with that," he said.

The AMA and the American College of Physicians said they would welcome the addition of the panel as long as it contained doctors that are in a good position to identify the true value of certain services.

"The AMA is pleased that MedPAC recognized the value of the RUC, which is constantly improving on its own process," Dr. Hill said. "If an additional expert panel is appointed to help identify services to be reviewed by the RUC, it should represent current practicing physicians."

But some physicians are wary of the panel's makeup and fear that it could unfairly reduce Medicare payments for vital therapies. Congress and CMS need to be careful that they don't defer judgment to people who could stand to gain financially by squeezing reimbursements, James Regan, MD, a urologist in Washington, D.C., said at the MedPAC meeting.

"When you tell me that you're going to put on this expert panel private insurers, alarms go off in my head, because my perspective as a caregiver is that they have different allegiances than I do. Sure they want to provide care to [patients], but in many instances there are stockholders involved," he said. "So be sure and strike a balance between the private insurers and the physicians ... on that expert panel."