Congress Provides Six-Month Reprieve From Medicare Payment Cuts

AAFP Decries Temporary Fix

By James Arvantes
12/19/2007

Thanks in part to concerted efforts by AAFP members, Congress has passed a minimal Medicare payment increase for the next six months as part of a bill that temporarily postpones deep cuts in the Medicare physician payment rate, thus averting a Medicare payment crisis for the present.

In a last-minute deal, congressional members agreed to a 0.5 percent increase in the Medicare physician payment rate for the first six months of 2008, postponing a 10.1 percent reduction in the payment rate that was scheduled to take effect on Jan. 1 under the sustainable growth rate, or SGR, formula. President Bush is expected to sign the bill.

Nevertheless, physicians face a cut of more than 10 percent that is scheduled to go into effect on July 1 and another steep reduction in 2009 unless Congress acts, creating an unstable payment environment that threatens patient access to care. In addition, the 0.5 percent increase may not provide much help to physicians who face continuing annual increases in the cost of doing business.

"Financially, family physician practices are bleeding to death," said AAFP President Jim King, M.D., of Selmer, Tenn., in an interview with AAFP News Now. Congress is engaged in a delaying action, said King, postponing "what needs to happen, which is a complete re-evaluation of the payment system and an elimination of the SGR in order to bring some sanity to our present payment formula."

Medicare Participation

The deadline for altering your Medicare participation status is Dec. 31. Here are options for participating in Medicare.

Being a participating physician. You may sign a participation agreement and accept Medicare's allowed amount as payment in full for all your services to Medicare patients. Typically, the allowed amount is the 80 percent Medicare pays, plus patients' copayment of 20 percent. The Medicare allowed amount is 5 percent higher for participating physicians than for nonparticipating physicians.
Being a nonparticipating physician. You may charge your Medicare patients up to about 9.25 percent more than the Medicare-allowed amount for participating physicians. However, in the end, your total revenue from sources such as Medicare and patient copayments might not exceed your revenue as a participating physician because of factors such as collection costs and bad debts.
Using private contracting. You must submit an affidavit to Medicare agreeing to opt out of any Medicare payments for two years and may contract with all of your Medicare patients for them to pay you outside of Medicare. Under private contracting, there is no limit on what a physician may charge a Medicare patient.

Note: Medicare participation agreements for participating and nonparticipating physicians do not require physician practices to accept every Medicare patient who seeks treatment from them. In addition, physicians can decide to stop seeing their current Medicare patients but remain in the program so they do not have to opt out of Medicare for the two years required under the private contracting option.

The legislation "does little to avoid the destabilizing impact that such a cut would have had on family physicians' 2008 business plans, including those for expanding patient access to care, investing in health information technology and implementing office redesign to increase efficiency," said King in a written statement from the Academy.

"At the same time family physicians are being urged to transform their practices to become patient-centered medical homes, their future Medicare payment is threatened," said King in the statement. "Now, America's family physicians will have to decide whether to continue seeing their current Medicare patients or whether to accept new Medicare patients, knowing their payment could be slashed by even more than 10 percent, come July."

King told AAFP News Now that family physicians are qualified to and want to continue to care for all of their patients, including those on Medicare, "but we are being forced into an untenable economic position" by cuts to Medicare payments, he said.

The SGR employs a formula that aligns actual spending rates with specified targets to determine Medicare payment levels. During the past six years, Medicare spending has exceeded targeted rates, triggering steep reductions in payments to physicians that have been averted only by last-minute congressional intervention.

This year, as in past years, the AAFP has zeroed in on payment cuts, mobilizing its members to contact their legislators and ultimately convincing Congress to block the impending payment reductions.

Congressional Conference is Chance to Speak Up

AAFP members will have an opportunity to meet with their elected representatives in Washington during the mid-May 2008 Family Medicine Congressional Conference. "We have strategically expanded the conference to allow participation by more members of the AAFP and family medicine academic organizations," said Kevin Burke, director of the AAFP Division of Government Relations. "This conference will be an effective way for these members to reach their legislators and make clear how disappointed and concerned they are" about Medicare payment cuts.

During the past year, the AAFP and its members have met frequently with House and Senate leaders, and the Academy has issued several action alerts to its members asking them to bolster the AAFP's message among federal lawmakers.

The Academy also participated with other physician organizations in two virtual rallies this fall, the last one generating more than 14,000 phone calls from physicians to Capitol Hill offices in opposition to the payment cuts. In addition, the AAFP has taken out advertisements in prominent Washington publications warning about the impact of Medicare payment cuts on physicians and patients.

During the six-month delay, the AAFP and its physician members will work on preventing the scheduled payment cuts in the latter half of 2008 and formulating strategies for replacing the SGR.

"Contact your legislators in your Congressional district and your state during the holiday break, and make sure they understand that they have to fix (the SGR) formula as soon as possible," King urged AAFP members.

In addition, AAFP will be working on other ways to mobilize members to contact legislators and the Bush administration after Congress is back in session in February.

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