Medicare crisis avoided, but hard work ahead

The physician community breathed a collective sigh of relief in December 2006 when Congress, just before adjourning, passed legislation that averted a 5% cut to the 2007 Medicare conversion factor. Instead, this year's factor, which turns the value Medicare places on services into dollar amounts, will remain at 2006 levels.

Now doctors have to inhale deeply and prepare for a new fight to prevent not only a reduction in 2008, but consecutive cuts until 2015.

As the American Medical Association noted after the vote, the legislation provides only a temporary reprieve for doctors and Medicare patients. The AMA was instrumental in averting the 2007 cuts and praised lawmakers from both sides of the aisle for working together to make the stay happen.

The Association has been pushing for years for a long-term solution to Medicare's reimbursement problems. This year, it will continue the drive for permanent payment reform for the sake of doctors and the patients who rely on them.

The stakes are high for both. Physicians, although helped by the continuation of 2006 rates, still come out behind financially this year when increases in practices costs are taken into account.

In addition, because of the way Congress financed the payment legislation, doctors face a 2008 cut of as much as 10%, according to the Congressional Budget Office.

To make matters worse, under the flawed Medicare reimbursement formula, physicians' payment would drop about 40% over the next eight years. During that time, the cost of running their practices would increase about 20%.

The outcome is predictable. Physicians caught in this financial vice would be forced to cut Medicare patient caseloads -- a move they would much prefer to avoid. A March 2006 AMA Member Connect survey, conducted before the legislation passed, confirmed this. About 67% of doctors said they would either decrease or stop seeing new Medicare patients if a nine-year series of reductions were to occur.

Medicare patient care would suffer in other ways. About 73% of doctors would put off the purchase of new medical equipment, 72% would reduce the time spent with Medicare patients and 71% would stop providing certain services.

The cuts' impact would resonate beyond Medicare. Because TRICARE payments are linked to Medicare reimbursement, the decreases would hurt access for military patients. Many private plans tie their rates to Medicare, so physician practices would suffer a financial hit in that sector as well.

The legislation, signed by President Bush in December 2006, sets aside $1.35 billion to avert the 2008 cut. But these funds fall short of what's needed to finance adequate payments next year, let alone permanent reimbursement reform.

The measure also provides a 1.5% bonus payment starting in July to physicians who begin reporting certain quality measures under the Centers for Medicare & Medicaid Services voluntary program. This, too, fails to cover the increased costs of running a physician practice.

In addition, the CMS reporting framework has flaws. The AMA will work with the new Congress to address those concerns.

The Association already is demonstrating its commitment to improving the quality of care for all patients. The AMA-convened Physician Consortium for Performance Improvement so far has developed 151 quality measures. The Association will work to ensure that the panel's measures form the foundation of any Medicare quality reporting program.

On the payment front, the solution is clear. The Medicare formula should be scrapped and a new system put in place ensuring that annual physician payment updates reflect the increase in practice costs. Doctors should not have to fight each year, as they've done for several years now, to prevent unfair reimbursement cuts.

For physicians and their Medicare patients, Congress must not let another year go by without comprehensive physician payment reform.