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Medicare Doc Payment Fix: It's Not Getting Any Easier

By Mary Agnes Carey, CQ HealthBeat Associate Editor

April 4, 2008 -- The increasingly frequent ritual of trying to prevent a scheduled cut to Medicare physician payments is starting again, with Senate Finance Committee Chairman Max Baucus, D-Mont., working to put together a package that would prevent a 10.6 percent cut in Medicare physician payments scheduled for July 1.

Baucus favors an 18-month fix and he has invited physician specialty and other clinician groups to meet with him April 11 "to relay his priorities" for the Medicare package. While rumors abound that the legislation is shrinking due to difficulty finding payment offsets, a statement Friday from Baucus's office outlines several priorities for the bill.

"Chairman Baucus is working with his colleagues on the Finance Committee and in the Senate to move an 18-month fix to the Medicare Physician payment system. He intends to move a package that does more than extend current law, though, and is calling on Congress and the White House to join him," said a Baucus aide. "Senator Baucus' priorities include reducing existing barriers to the subsidy programs for low-income seniors, increasing access to preventive and mental health services, bringing assistance to providers in rural areas, and expanding value-based purchasing programs to increase quality and reduce costs. He hopes to move the package quickly." Money, of course, will be the problem. With Bush administration officials and some members of Congress strongly opposed to any reductions in payments to Medicare Advantage plans, Baucus will have to look elsewhere for funding. According to the Congressional Budget Office (CBO), keeping Medicare physician payment rates the same for 2008 with a zero percent update—but cutting payments by 20 percent in 2010—would cost $8.1 billion over the next five years. Keeping payments the same for 2008 but giving doctors a payment increase of 1 percent next year and reducing payments by 21 percent in 2010 would cost $8.7 billion.

An AMA spokeswoman said Friday that the physicians' group remains concerned about financing arrangements that may spare docs pain now but promise a bigger financial hit later. But as a practical matter, physician organizations may have no alternative but to go along with that approach in the near term in the absence of consensus on a more permanent solution to the Medicare payment formula calling for many years of sharp cuts.

Managed care organizations aren't assuming they are off the hook for payment cuts to pay for the measure. "We're not taking that for granted," an industry executive said. The industry is determined to resist cuts while it has the support to block them, knowing that next year could be a different story with Democratic gains in the November elections. "A bigger storm is going to break," the executive said.

Medicare Advantage plans in states such as Massachusetts and Pennsylvania that would be hard hit by removal from their payment rates of adjustments meant to compensate for the higher cost of care in teaching hospitals are spending an "enormous" amount of time trying to block such a change in their payments, the executive added.

Potential offsets for the Finance package include no payment update for durable medical equipment providers in exchange for delaying the first round of competitive bidding program set to begin July 1, a health care lobbyist said. Some equipment providers have opposed the program, saying it will drive many companies out of business and hurt product innovation because prices will be set too low to justify research and development. Administration officials have said that competitive bidding will save Medicare and beneficiaries money on items such as diabetes supplies, walkers, hospital equipment and other medical equipment.

Adding in payment incentives for rural providers, as Baucus suggests, and including language on "comparative effectiveness," research that compares treatment outcomes and analyzes the clinical effectiveness of alternative therapies for the same condition, may also help attract support. CBO, many lawmakers and health care analysts have embraced the idea as a way to improve health care quality and reduce costs.

Finding ways to finance the doc fix remains the big issue. "We have other packages," Finance Committee ranking Republican Charles E. Grassley of Iowa responded Thursday when asked how the panel would find money other than from Medicare Advantage. "We're going to have to do something in a bipartisan way or we're not going to get anything done." Some health care analysts have suggested that the final outcome will be something less than an 18-month payment fix, perhaps finding a Medicare physician payment solution that would last through next March when the extension of funding for the State Children's Health Insurance Program (SCHIP) is set to expire.

No matter what the size of the Finance bill, proceeding straight to the Senate floor may be the fastest route for action. "If we bring it through committee it won't just be the doc fix," said one Senate Democratic aide. "This thing could die a slow, painful death in committee with any number of things." John Reichard and Alex Wayne contributed to this report.

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