Medicare to cut physician pay — maybe

The bipartisan attempt to work out an agreement to fix the Centers for Medicare & Medicaid Services physician payment schedule has fallen apart. This means that physician payments will be cut 10.6 percent on July 1 and probably another 5 percent or more on Jan. 1, 2009.

“This would be the second time that Congress failed to step in to freeze the payment schedule,” says Julius W. Hobson Jr., a senior policy adviser at Powell Goldstein and a former director of the American Medical Association’s division of congressional affairs. The first time Congress did not step in was right after 9/11.

Understandably, Congress’s focus was not on CMS cuts back then. And since many third-party payers peg their payments to what CMS pays, a physician “would have ended up with a 30 percent reduction in payments across the board,” says Hobson.

Finance Coommittee Chairman Sen. Max Baucus, Democrat from Montana, and Sen. Chuck Grassley, Republican from Iowa, have publicly committed to passing a fix, including retroactive compensation. However, it probably won’t be in time for the June 30 deadline, putting most physicians in an administrative bind if they try to go back and collect.

Many primary care physicians would then stop accepting new Medicare patients, says Hobson. “I think we’re going to see the start of access problems for seniors because the payment rates are too low.”

They will end up in hospital emergency departments, which is what always happens, says Hobson. “That will put a strain on the system, and for managed care it means an increase in costs. It’s more expensive to receive treatment in the emergency department than in a physician’s office.”

Source: Adapted from the 2008 American Medical Association Medicare Physician Payment Action Kit. Medicare Economic Index. Physician payment updates are from the 2007 Medicare Trustees report with 2008 adjustments to reflect Sen. 101 of P.L. 110-173.