Medicare Physician Fee Schedule
Background
Medicare payment rates for physicians are updated annually
by a calculation based on inflation in physician costs and
then adjusted further according to how Medicare spending compares
with a target rate of growth, known as the sustainable growth
rate (SGR). The SGR is based upon the Gross Domestic Product
(GDP) of the entire American economy irrespective of increases
in health care costs. If Medicare spending is less than the
SGR, doctors’ payment rates are increased. If the costs
are more than the SGR, rates at which physicians are reimbursed
are reduced.
In accordance with this formula, Medicare payments to physicians
in 2002 were reduced by 5.4 percent. In 2003, Congress blocked
the 4.4 percent cut scheduled for that year and replaced it
with a modest increase of 1.6 percent. Later in 2003, the
enactment of the Medicare reform law (Public Law 108-173)
blocked scheduled rate cuts for 2004 and 2005 and provided
a 1.5 percent increase in those years.
If Congress does not act to change the law, the payment rates
after 2005 will revert to the SGR formula, which is expected
to result in rate cuts of approximately five percent each
year from 2006 to 2012.
AAGP Position
AAGP has long held that use of the SGR penalizes physicians
for volume increases when the government itself promotes greater
use of physician services through new coverage decisions,
quality improvement activities and a host of other administrative
decisions that are good for patients but are not reflected
in the SGR. The medical needs of patients do not decline during
economic downturns. Furthermore, because Medicare requires
a discriminatory 50 percent copayment for outpatient mental
health benefits, cuts in the Medicare reimbursement rate disproportionately
affect geriatric mental health patients, for whom inadequate
access to care is serious problem.
AAGP strongly supports efforts to prevent the cuts in the
Medicare physician fee schedule from going into effect on
January 1, 2006, and to enact a long-term correction of the
Medicare physician payment formula. Physicians cannot afford
to accept an unlimited number of Medicare patients into their
practices when they are facing continued payment reductions.
These drastic cuts must be stopped before they seriously curtail
Medicare beneficiaries’ access to care. AAGP will continue
to work with other physician organizations to put pressure
on Congress to adopt reforms that assure reasonable, predictable
payments to physicians under Medicare.
March 2005
|
