Senate Finance Committee Works To Finalize Physician Payment Bill

Members of the Senate Finance Committee are divided about whether to provide a one- or two-year physician payment update as part of a bill the committee plans to introduce within the next few weeks.

Committee Chair Sen. Max Baucus, D-Mont., has proposed a two-year payment update that would provide a slight increase in physician payment rates during the next two years to counteract deep reductions in those rates called for under the sustainable growth rate, or SGR, formula.

Sen. Charles Grassley, R-Iowa, the senior Republican on the committee, has called for a one-year physician payment freeze that would prevent a 9.9 percent reduction in physician payment rates in 2008. If adopted, the one-year update would not address a 5 percent reduction in rates scheduled to take effect in 2009, creating "another year of uncertainty," for physicians, said Kevin Burke, director of the AAFP's Division of Government Relations.

"If Congress does not provide a two-year update, we will simply be back in the same situation next year," said Burke. "We won't make any progress in solving this problem."

The SGR determines annual Medicare payment rates by using a formula that aligns actual spending rates with specified targets. During the past few years, spending has exceeded targeted rates, triggering steep reductions in physician payment levels that have been averted only by last-minute congressional intervention. Congress wants to "pay physicians appropriately," but congressional members have to scramble each year to find offsets to pay for the physician update, said Burke.

"It has become an annual battle, and we are losing the ability to find offsets," he lamented.

Not surprisingly, a one-year physician payment update costs less than a two-year update, making a one-year adjustment a more attractive alternative for some members of the committee, which plans to take money from Medicare Advantage, the government's managed care program, to pay for at least some of the update. With a two-year update, the committee would have to make deeper cuts to Medicare Advantage, an untenable alternative for some Republican and Democratic committee members who favor the program.

"If Congress pays physicians appropriately, where do they take the money from?" asked Burke. "That's the calculation each of the (committee) members is making, and they need to hear from physicians. That's critically important as they make those decisions. If they don't hear from physicians, they can safely assume that it doesn't matter that the rates will be decreased by 10 percent next year and 5 percent after that."

AAFP representatives are meeting with each member of the finance committee and telling him or her that a one-year freeze is "not an acceptable alternative," Burke said. "We, along with several other physician groups, are asking our members to carry the same sort of message to Capitol Hill."

Without a two-year update, Congress will be dealing with the Medicare payment issue again next year -- during a presidential election year when it is much more difficult to pass legislation, because other issues are likely to overshadow Medicare payment concerns. This makes it even more important that Congress pass a two-year update this year, said Burke.

"Lawmakers are going to be much more frozen into partisan positions next year," he explained. "Everything becomes more of a partisan political battle, and it is harder to find a middle ground."

House members, meanwhile, are waiting for the Senate to act on its legislation before introducing their own Medicare physician payment bill. The House earlier had included a provision that would have provided a 0.5 percent increase in Medicare physician payments for the next two years in a bill to reauthorize the State Children's Health Insurance Program. That bill passed the House in August, but House and Senate conferees later took the payment provision out of the bill passed by the full Congress, and now the House is "going to wait to let the Senate act next," said Burke.