Temporary Fix to Medicare Physician Payment Cuts Proposed

July 30, 2007

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Leaders in the U.S. House of Representatives recently introduced the Children's Health And Medicare Protection Act (or CHAMP Act, H.R. 3162) a bill which reauthorizes the State Children's Health Insurance Program (SCHIP) and provides a temporary, two-year fix of Medicare physician payments. The CHAMP Act would replace the Medicare physician payment cuts of 15 percent over the next two years with positive 0.5 percent increases. The updates would be funded by a new federal tax on tobacco and cuts in overpayment to Medicare Advantage plans. This bill will be voted on by the House soon.

If this bill passes, the physician community will have to revisit the Medicare payment issue in 2009 to prevent heavy payment cuts from starting in 2010. However, given the uncertainty of stopping the pending 2008 Medicare physician payment cuts, this bill may be the best and last opportunity to avoid cuts and secure a positive update.

Other Payment Features

The Medicare physician payment system would change by 2010. The sustainable growth rate (SGR) would be repealed: new targets based on Medical Economic Index (MEI) for six service categories would be implemented.

1) Primary Services and Prevention (Receives an annual increase of MEI plus 3 percent)
2) Other E/M (Cognitive specialties reside here)
3) Imaging
4) Major Procedures
5) Minor Procedures
6) Anesthesiology

The plan would remove drug expenditures from payment calculations, and provide increases for national coverage determinations. Incentives for reporting would also be removed: the PQRI would again be a voluntary program.

$54 billion in debt from previous years' SGR fixes would remain. Beginning in 2010, this $54 billion debt would be distributed among the six service categories. Medicare physician payments beginning in 2010 (MEI minus debt) would be reduced by 7 percent (the maximum set by the bill) until the $54 billion is repaid. Repayment could take up to 10 years.