Last-minute Medicare pay package freezes rates, adds reporting bonus

Washington -- In one of its final acts, the 109th Congress froze Medicare physician payments at 2006 levels, laid the groundwork for a pay-for-performance system and set aside money to fund future reimbursement changes.

Hitching a ride on a massive package of health, tax and trade legislation, the freeze stops the 5% across-the-board cut set to start Jan. 1, 2007. At press time, President Bush had not yet signed the bill into law but was planning to do so.

The latest congressional intervention on this issue marks another last-minute reprieve for doctors, many of whom said they would stop accepting new Medicare patients if reimbursement continued to decline. The American Medical Association led the charge on the stopgap legislation.

"Congressional action to avert next year's 5% Medicare physician payment cut will help avert a potential sharp decline in access for America's seniors," said AMA Board of Trustees Chair Cecil B. Wilson, MD.

"The AMA sincerely appreciates the bipartisan efforts by House and Senate leaders, committee chairmen, ranking minority members and congressional staff to prevent the Medicare cut triggered by the flawed Medicare physician payment formula," Dr. Wilson said.

With the Bush administration's implementation of a broad set of changes in the way that Medicare values certain physician services, reimbursement rates for some types of doctors actually will go up in 2007 despite the rate freeze. Other specialties will see an overall reduction in rates. But Medicare officials still expect total program spending on physicians to rise significantly as the volume of services they provide goes up.

The legislation also provides an additional bonus payment of 1.5% starting in July to physicians who start reporting certain quality measures, meaning that some doctors could boost their reimbursements in the final half of the year. This pay-for-reporting element will get Medicare on the track of paying more for better care, according to the bill's backers.

Expenses rising

But Medicare reimbursements continue to lag behind the increased costs to physicians of providing care to seniors and people with disabilities. With such costs rising at an average of 2% or more per year, some doctors say they are facing mounting financial pressures.

Meanwhile, the short-term nature of the pay provision troubles some lawmakers.

"Although I'm glad an agreement was successfully reached between the House and Senate on a physician fix and Medicare relief package, I am still disappointed that we have asked doctors, yet again, to wait for an actual long-term solution to their reimbursement problem," said Rep. Michael Burgess, MD (R, Texas), who has authored such a multiyear approach. "No 'negative update' is not the same as a positive update."

Congress granted doctors and their patients an "important but temporary reprieve," Dr. Wilson said. "The AMA renews its commitment to work with Congress, the administration and senior groups on a more permanent solution to the flawed Medicare physician payment formula. The time is long overdue to devise a sound financing system for the Medicare program so we can avoid this annual struggle to preserve seniors' access to care."

The challenge ahead

But the job of preventing cuts in 2008 is likely to be more difficult for the 110th Congress because of the way lawmakers paid for this year's fix. To reduce the cost of maintaining physician pay at 2006 levels and to establish a $1.35 billion reserve fund to be used to help pay for future payment changes or physician bonuses, Medicare will cut spending in other areas.

A $10 billion fund designed to stabilize Medicare managed care plans in case of funding shortfalls, for instance, will be reduced by $6.5 billion over five years by limiting plans' access to the money. In a move that is less welcome to doctors, Congress voted to expand the recovery audit contractor pilot program to every state by 2010. This could save Medicare billions more. The contractors scour physician, hospital and other claims to find overpayments, but some doctors have decried the firms as overly aggressive bounty hunters that hassle more than they help.

These offsets, though, were not enough to pay completely for the rate freeze, which the Congressional Budget Office priced at nearly $11 billion over five years. So next year's cut to physicians could prove twice as expensive to fix and cost doctors roughly twice as much if Congress fails to act. Because lawmakers borrowed against future reimbursements to prevent the 2007 cuts, physicians could face a 2008 reduction that is as high as 10% or more.

The failure of Congress to pay fully for the physician provision and other priorities angered some budget hawks who ended up voting against the roughly $40 billion health, tax and trade package. The vote was 367-45 in the House and 79-9 in the Senate.

"It's an accounting gimmick of such extraordinary brazenness that were you to do it in the corporate world, you would go to jail," said Senate Budget Committee Chair Judd Gregg (R, N.H.).

The legislation for the first time will instruct Medicare to pay more to doctors who voluntarily report on the quality of their care, a move that many have called the first step toward paying based on how well physicians actually score on such measures.

For six months starting in July 2007, physicians will receive a 1.5% bonus payment as long as they participate in the Physician Voluntary Reporting Program sponsored by the Centers for Medicare & Medicaid Services. Doctors can qualify for the extra dollars if they report to CMS on at least three of the program's quality measures for at least 80% of the cases in which the measures apply.

The bonus payment and its link to the CMS initiative is temporary. But the legislation calls on the agency to work with physician coalitions on developing consensus measures for use in 2008 and beyond. Congress also might decide to link Medicare payment in some way to those measures.

The AMA, which in the past has criticized the CMS voluntary program for being overly burdensome and misdirected in its choice of measures, renewed its commitment to help produce a quality reporting system but said the Association is concerned about 2007. "The AMA-convened Physician Consortium for Performance Improvement has already developed 151 quality measures, and we will work to ensure that consortium measures continue to form the foundation of a Medicare quality reporting program," Dr. Wilson said. "We will work closely with the incoming Congress to address concerns with the current reporting framework."

Congress will need to make sure that any reporting system it develops does not unfairly burden all doctors or those in certain specialties by making some quality measures too difficult to report, said Lynne M. Kirk, MD, president of the American College of Physicians. The college also will call on the 110th Congress to authorize additional administrative payments to physicians who spend the time and resources necessary to report the measures.