The Medicare Payment Advisory Commission (MedPAC) last week recommended that 2007 Medicare physician payments be updated by 2.8 percent based on the anticipated rise in practice costs. The recommendation is part of MedPAC’s 2006 report, submitted to Congress on March 1.

If Congress does not act on this recommendation, physicians are facing a 4.5 percent cut in 2007 and multiple years of steep cuts in subsequent years. The cuts are the result of the unsound sustained growth rate (SGR) formula, which allows Medicare spending on physician services to grow at the rate of the gross domestic product (GDP). The flawed formula actually penalizes physicians because the cost of physician services rises more rapidly than the GDP. The formula also fails to adequately account for the increase in the demand for services.

MedPAC has for years called on Congress to formally scrap the SGR formula and replace it with a formula based on actual practice costs. CMA and AMA will continue to aggressively push for a fair physician payment formula that is based on actual practice costs.

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