Sen. Max Baucus (left), D-Mont., chair of the Senate Finance Committee, confers with ranking member Sen. Chuck Grassley, R-Iowa, during a recent hearing.


Published 5/1/2008
Lindsay Law; Mary Ann Porucznik

Will there be a Medicare physician payment fix?

Baucus proposal would delay cuts for 18 months

On April 3, 2008, the chair of the Senate Finance Committee, Sen. Max Baucus, D-Mont., announced his intention to send a fix for the flawed Medicare physician payment formula directly to the Senate floor, bypassing committee markup. The proposed legislation applies an 18-month patch to the impending 10.6 percent cut, scheduled to go into effect on July 1, 2008.

The bill would give physicians a 1 percent increase through 2009 and would cost $8.4 billion over 5 years.

The measure would not add additional money to the Medicare program to reduce scheduled cuts in future years. This means that if Sen. Baucus’ proposal passes and Congress does not take additional action to fix the Sustainable Growth Rate (SGR) formula during the 18 months it is in effect, a 21 percent pay cut would go into effect on Jan. 1, 2010.

According to the Congressional Budget Office, using the Medicare Economic Index—a measure of inflation faced by physicians with respect to their practice costs and general wage levels—would result in roughly a 1.5 percent to 1.7 percent increase in payments and would cost $8.7 billion over 5 years. Maintaining the current physicians’ fee schedule with no increases would cost $8.1 billion over 5 years. Both of those estimates also assume at least a 20 percent pay cut would go into effect in 2010.

Republican members of the Finance Committee have conditioned their support for an 18-month fix on negotiators’ ability to agree on offsets, which means cuts to private Medicare Advantage plans are likely off the table.

AAOS provides input
AAOS staff met with Sen. Baucus on April 11 to help shape the proposed legislation in keeping with the principles of the orthopaedic community. During this meeting, Sen. Baucus called on the physician community to work together to find solutions to fix the SGR. He also expressed frustration in the Congress for not yet having found a permanent fix.

Sen. Baucus indicated that the Senate is working closely with the White House on his proposed Medicare legislation. The proposed 18-month fix is longer than any of the three previous fixes (dating back to the Deficit Reduction Act). According to a memorandum issued by the senator’s staff after the meeting, Sen. Baucus plans to hold a series of hearings on comprehensive health reform “to explore and craft more meaningful methods of improving and reforming how the U.S. healthcare system pays for medical care.”

As this issue of AAOS Now went to press, orthopaedic leaders—including members of the AAOS Board of Directors, Board of Councilors, Board of Specialty Societies, Orthopaedic Political Action Committee, and state orthopaedic societies—were preparing to meet at the National Orthopaedic Leadership Conference (NOLC) in Washington, D.C., April 30-May 3.

A key aspect of the NOLC is the Hill visit program, scheduled for May 1. Orthopaedic leaders will meet with key senators and representatives to deliver a strong message, focused on patient access to care. Their voices will echo the most recent report of the Medicare Payment Advisory Commission, which stated: “The existing SGR formula is flawed and the Commission is concerned that repeated annual reductions in physician payments could threaten beneficiaries’ access to physician services.”

Making the case for change
“When doctors say ‘cut,’ we mean an actual cut—receiving less for the same procedure. When other providers say ‘cut,’ they mean not their full increase—but still an increase,” said Nancey McCann, director of government relations for the American Society of Cataract and Refractive Surgery (ASCRS). The ASCRS, like the AAOS, is a member of the Alliance of Specialty Medicine, a nonpartisan coalition of 11 national medical specialty societies representing more than 200,000 physicians dedicated to the development of sound federal healthcare policy that fosters patient access to specialty care.

“No other providers—only physicians—are subject to an expenditure target,” said Ms. McCann. “Because the target is cumulative, once we’re in the hole, we’re always in the hole.”

At the same time that physician payments are being cut, practice costs are continuing to increase.

As a result, physicians are being squeezed economically and are looking for ways to cope. One option that many physicians are considering is to limit the number of new and established Medicare patients that they treat—just as the leading edge of the baby-boom generation starts enrolling in Medicare.

According to a survey conducted by the American Medical Association, if Medicare payments are cut by 10 percent in 2008,

60 percent of physician respondents plan to limit the number of new Medicare patients they treat—and 40 percent of physician respondents plan to limit the number of established Medicare patients they treat. More than two-thirds of physicians will defer investments in their practices, including the purchase of new equipment and information technology. More than half of those surveyed said they would have to cut staff.

No proposal does it all
According to an AAOS analysis of current 2008 Medicare legislative proposals, none of the current legislative proposals in either the House or the Senate is ideal. All neglect to address one or more components of a true “fix” to the Medicare physician payment system.

“Every year, we fight these cuts,” says David A. Halsey, MD, chair of the AAOS Advocacy Council. “And every year, Congress puts a bandage on the problem instead of fixing it. We are getting to the point where access to care is being threatened—and that is actually very hopeful. It might just be the prompt that Congress needs to finally focus on this important issue.”

Orthopaedists send message to Congress
During the National Orthopaedic Leadership Conference Hill visits, orthopaedic surgeons will urge members of Congress to make patient access to musculoskeletal services a Congressional priority and fix the broken Medicare physician payment formula. The AAOS urges members of Congress to support patient access to care by:

  • Passing legislation to avoid the scheduled 10.6 percent reduction on July 1, 2008, and provide a positive update over the next 18 months
  • Enacting a long-term solution to replace that SGR with an updated system that reflects increases in physicians’ and other health professionals’ practice costs and including support for physician efforts to invest in health information technology and quality measurement
  • Supporting initiatives by organizations representing physicians and other health professionals to bridge gaps in care and ensure the appropriateness of services provided to Medicare beneficiaries
  • Reexamining the Physician Quality Reporting Initiative before expanding it into future years
  • Identifying and enacting additional reforms necessary to create incentives for judicious use of services and to adequately fund the program