Fall 2006
Vol. 16, Number 3

Once again, physicians are facing a cut in Medicare reimbursements unless Congress steps in. According to the new proposed fee schedule released by the Centers for Medicare and Medicaid Services (CMS) this August, Medicare reimbursements will be cut by 5.1 percent beginning Jan. 1, 2007. Bills to fix the problem either temporarily or permanently are pending. A temporary fix sparing physicians the 5.1 percent cut is considered most likely to occur. Passage of a permanent fix is unlikely this year.

The proposed cuts, should they occur, would slice deep into the gains in the value of evaluation and management services IDSA recently achieved during CMS’s five-year review of current procedural terminology service codes. (See “IDSA Scores Increased Reimbursement for ID Physicians,” IDSA News Summer 2006, p. 1.) Working through the American Medical Association’s Relative Value Update Committee, IDSA has negotiated reimbursement rate increases that would add up to 9 percent (see table) for the infectious diseases specialty as a whole, the largest increase of any specialty. But CMS’s proposed cuts continue to widen the gap between reimbursement and practice costs.

Sustainable?

Cuts have loomed for the last several years because the CMS formula used to calculate reimbursement rates, the “sustainable growth rate” (SGR), has fundamental flaws. In most years, Congress has stopped the cuts from taking place by passing a temporary fix, but the problems with the SGR have remained.

One reason the SGR cuts physician fees is because more beneficiaries are receiving more services, and more intensive services, than the SGR spending target allows. Spending growth due to volume and intensity increases has been more than double the SGR targets. The SGR cuts physician reimbursements in order to limit the total amount the program spends.

Overall, the SGR is expected to cut physician reimbursement by a third over the next nine years unless Congress enacts a permanent fix. Fixing the problem will not be cheap. Replacing the 2007 physician payment cuts with a 1% update would cost $13 billion, according to Congressional Budget Office (CBO) estimates. A complete overhaul of the system would cost $58 billion over five years. But short-term fixes will only make a permanent fix to the SGR more expensive in the future.

IDSA and other medial societies have been urging a permanent fix to the physician payment problem for years. They point out that these cuts threaten access to medical care for the nation’s elderly and disabled as caring for Medicare beneficiaries becomes unaffordable.

Lawmakers are considering a bill that would replace the SGR with a formula that includes the Medicare economic index, which tracks physicians’ cost of doing business. At the same time, this bill would establish a voluntary system for physicians to report data on measures of quality. As an incentive, those who participate in this system would be allowed to bill some higher-income patients more than current Medicare law allows.

IDSA is watching this bill closely, but considers it unlikely to pass this session. Congress will likely pass another short-term fix that might include financial incentives for quality reporting. The Society will continue to provide updates.