Physicians' Medicare Payment May Drop 4.3 Percent, Says CMS

Your reimbursement for Medicare services may plummet 4.3 percent next year. That's the dire warning the Medicare Payment Advisory Commission received from CMS March 31.

Why the drop? "Underlying this update (estimated at -4.3 percent) is substantial growth in spending," a growth of about 15 percent from 2003 to 2004, said CMS in its letter on the 2006 physician fee schedule.

Targeting increases in volume and intensity of services, CMS said the vast majority of the spending growth was attributable to five factors (see table below).

Of the 15 percent growth in 2004 Medicare spending, the area of largest growth was office visits. Where did family medicine rank in increased visit costs? Second. Internal medicine was first, contributing 3.8 percent to the overall rise in spending for visits; family medicine contributed 3.2 percent. Cardiovascular disease-related visit costs ranked third, at 1.4 percent, and visits related to orthopedic surgery ranked fourth, at 0.7 percent.

Under the current formula, using the sustainable growth rate, payment decreases of about 5 percent a year could continue, said the Academy in a written statement to the U.S. House Ways and Means Health Subcommittee Feb. 23.

"Such unrelenting decreases will make it impossible for many more family physicians to accept new Medicare patients," the Academy said in the written statement, Medicare Reimbursement to Physicians.

The Academy and many medical organizations are seeking repeal of the SGR formula used for reimbursement rates. The organizations are calling instead for basing reimbursement on the Medicare economic index -- the government's regular estimate of the cost of practicing medicine. The Academy contends such a method would result in an update that would more closely keep pace with the cost of providing health care services.