Congress Stops Medicare Physician Payment Cuts; Freezes Physician Payments at 2005 Rates for One Year
[Updated 12/22/05]

The U.S. Senate on Wednesday approved the federal budget package, freezing Medicare physician reimbursement at 2005 rates for one year. This freeze forestalls the 4.4 percent cut that was scheduled to take effect on January 1. The budget bill does not, however, fix the flawed geographic payment formula.

The U.S. House of Representatives approved a similar budget bill on Monday. Because the Senate made some minor changes to the budget, it will have to go back to the House for another vote before it can be sent to President Bush for his signature. Although passage is all but certain, the timing remains uncertain, as most House members have already returned home for the holidays.

If the House is unable to pass the Senate-ammended budget by January 1, it is possible that the 4.4 percent cut will go into effect. Should that happen, the House will need to immediately take up the issue after the holiday recess, blocking the cuts retroactively, if necessary. CMA has called the Centers for Medicare & Medicaid Services to determine what they intend to do if the budget bill is not passed and signed by the President by January 1. We are awaiting a response and will notify physicians as soon as we have more information.

It is a significant achievement that CMA, AMA, and other medical associations were able to convince Congress not to cut physician payments. Replacing the 4.4 percent cut with a payment freeze will cost $7.3 billion in a year when budget increases went to very few programs, including Katrina rebuilding, flu pandemic planning and prevention, and the war in Iraq. Medicare’s overall budget was cut $8 billion.

“While we appreciate that Congressional leaders stopped the cut, we are extremely disappointed there was no positive update and that the GPCI disparity was not fixed,” said CMA CEO Jack Lewin, M.D., after reviewing the Medicare provisions in the budget package.

There is a silver lining, however. As this is a one-year freeze and 2006 is an election year, Congress will have to deal with the Medicare payment issues when it reconvenes in January. Having this issue before Congress in an election year will give CMA good leverage as the association continues to aggressively fight for a real fix to Medicare’s sustainable growth rate and geographic payment formulas.

The rush to adjourn also forced Congressional leaders to abandon their hastily-put-together pay-for-performance (P4P) plan. CMA believes that any P4P initiative must provide for strong physician input on how “quality” is defined and measured, ensure physicians are appropriately reimbursed for clinical care, and protect patient access to care.

Although the budget does cut Medicaid spending by $10 billion over the next 10 years, earlier versions of the budget bill cut Medicaid by twice that amount.

Click here to read a preliminary summary of the federal budget as it impacts health care.

Contact: Elizabeth McNeil, 415/882-3376 or emcneil@cmanet.org.