Some Medicare Physician Payments Will Decline Despite Freeze

The Deficit Reduction Act of 2005 was supposed to freeze Medicare physician payment rates for 2006 at 2005 levels, so why, asks a family physician from Marcellus, N.Y., am I seeing a reduction in my Medicare payments?

Kent Moore, AAFP manager of health care financing and delivery systems, fielded the member's question and confirmed that some physicians' payment rates could be lower in 2006. The culprit, he said, is a geographic adjustment factor.

Changes to the practice expense geographic practice cost index, or GPCI, were not affected by the Deficit Reduction Act, said Moore. He further explained that the relative value units for each medical service provided include three components -- work, practice expense and malpractice. Each of these components is adjusted by a GPCI before the three are totaled and multiplied by the conversion factor to arrive at the Medicare allowance, said Moore.

In 2005, the practice expense GPCI in Marcellus, N.Y., was 0.930; however, the area's practice expense GPCI dropped to 0.917 in 2006. That resulted in a negative payment differential of 27 cents for a 99212-level office visit and 34 cents for a 99213-level office visit in 2006. Although small, those decreases will add up over the course of the year, said Moore.

Moore pointed out that the Academy's Medicare reimbursement policy supports elimination of all geographic adjustment factors from the Medicare physician fee schedule except for those designed to achieve a specific public policy goal, such as encouraging physicians to practice in underserved areas.