CMS Proposes Medicare Rule That Includes 9.9 Percent Payment Cut

CMS has proposed revising Medicare payment rates, extending the length of a quality reporting program and implementing a controversial provision to reduce Medicare physician payments by nearly 10 percent next year.

The agency issued a proposed rule on July 2 that calls for several revisions in the Medicare physician fee schedule in 2008 and an extension through next year of the Physician Quality Reporting Initiative, or PQRI, which pays physicians for participating in a voluntary quality reporting program under Medicare.

In addition, the proposed rule contains a provision that would reduce physician payments under Medicare by 9.9 percent next year, as called for by the sustainable growth rate, or SGR, formula used to determine those payment rates. That provision represents CMS' calculation based on the SGR formula and is unlikely to be implemented.

"We have commitments from both the House and Senate leadership that they will not let this cut go through," said Kevin Burke, director of the AAFP Division of Government Relations.

The SGR formula determines annual Medicare payment rates by aligning actual payment rates with specified expenditure targets. During the past five years, spending has exceeded targeted limits, triggering steep reductions in physician payments that have been averted only by last-minute congressional action. Without congressional intercession this year, use of the SGR formula will result in a 9.9 percent cut in physician payment in 2008.

"For the past five years, Congress has intervened to prevent the implementation of the negative updates resulting from this formula," said acting CMS Administrator Leslie Norwalk, J.D., in a July 2 press release. "CMS will continue working with Congress as well as physician groups to identify payment methods to help improve the quality and efficiency of care in a way that is cognizant of the costs to taxpayers and to Medicare and its beneficiaries."

CMS could have taken $1.35 billion from a fund for the PQRI program and used it to reduce the pending Medicare pay cut to about 7.9 percent in 2008. But in the proposed rule, the agency elected to extend the PQRI through 2008 and to boost payments for physicians participating in the program by 1.5 percent.

Congress created the PQRI through the Tax Reform and Health Care Act of 2006. The program, which began on July 1 and is scheduled to end in December, serves as an example of how CMS plans to "promote better quality care and more efficient care," according to Norwalk.

"The Medicare program needs to compensate physicians appropriately for the services they provide to people with Medicare," said Norwalk.

CMS will publish the proposed rule in the July 16 Federal Register and collect comments until Aug. 30 before publishing a final rule on Nov. 1.