MedPAC Recommends 1.1 Percent Physician Payment Increase for 2009

Congress should provide a 1.1 percent increase in the Medicare physician payment rate in 2009 to stabilize the Medicare payment system and prevent a steep payment reduction that is scheduled to take place under the sustainable growth rate, or SGR, formula in 2009. That's the gist of a key recommendation (413-page PDF; About PDFs) adopted recently by the Medicare Payment Advisory Commission, or MedPAC.

In a nearly unanimous vote during a Jan. 10 meeting here, the 17-member commission approved a recommendation that would provide a 1.1 percent increase in physician payment rates in 2009, essentially negating a 5 percent reduction scheduled to occur under the SGR formula in 2009. However, MedPAC members expressed reservations about the recommended 1.1 percent increase, saying it is too small to keep pace with inflation and medical costs. MedPAC, which advises Congress on Medicare issues, will submit the recommendation to Congress as part of its March report.

"I don't think that this recommendation should be interpreted by anybody in this room or by Congress as MedPAC saying 'Oh, everything is OK; just adjust the conversion factor a little bit,'" said MedPAC Chair Glenn Hackbarth, J.D., who voted for the recommendation. "I think that there are a lot of real difficult issues in terms of the impact of the payment system on physicians."

FP Thomas Dean, M.D., of Wessington Springs, S.D., the only family physician on MedPAC, could not attend the meeting, so Hackbarth read Dean's written statement aloud during the meeting. Dean wrote that he supports the recommended 1.1 percent increase with "some significant reservations." For example, he pointed out that the increase "does not adequately compensate for increases in practice costs," and that it could further antagonize the physician community.

Urologist Ronald Castellanos, M.D., of Fort Myers, Fla., one of only two members to vote against the recommendation, said the 1.1 percent proposed increase in physician payment rates does not really amount to an increase when other costs and factors are taken into consideration.

"Quite honestly, it's insulting," he said.

In making its recommendation, MedPAC is asking Congress to override the SGR in 2009 and to base the physician payment rate on two other factors that also determine payment levels: input prices and productivity growth. When taken together, these two factors result in a 1.1 percent increase in the physician payment rate in 2009, said John Richardson, principal policy analyst for MedPAC.

The cost of overriding the SGR in 2009 would total more than $2 billion during a one-year period and more than $10 billion during a five-year period, Richardson told the committee.

The MedPAC recommendation consists of two parts: The first calls on Congress to provide a 1.1 percent increase in Medicare physician payment rates in 2009, and the second asks Congress to "enact legislation requiring CMS to establish a process for measuring and reporting physician resource use on a confidential basis for a period of two years." This second part of the proposal is intended to give physicians feedback on how they are treating their patients and the resources they are using to treat patients compared with those being used by other physicians.

Dean strongly supported the second part of the recommendation, saying in his written statement, "We need to get the message to the physician community that (physicians) are the ones in the best position to help revamp the current system, and we need more information about our performance."

In other actions, MedPAC recommended a full "market-basket" increase for hospitals, an increase based on input prices for hospital services. The commission also approved a 1 percent reduction in the indirect medical education allowance for teaching hospitals to fund quality incentive payments for all hospitals. In addition, MedPAC recommended a 1.6 percent increase for long-term, acute-care hospitals and a flat payment update for skilled nursing facilities, inpatient rehabilitation facilities and home health care agencies.