Physicians, CMA needs you to turn up the heat on your members of Congress and motivate them to fix the Medicare payment problems before Congress adjourns in September. As you know, CMA has for years been fighting for long-term fixes to Medicare’s flawed sustainable growth rate (SGR) formula and the inequitable geographic payment locality groupings (GPCI).

If Congress fails to act before the end of the year, physician rates will be cut 4.6 percent on January 1 of next year, and rates will be cut by a total of 35 percent during the next six years. The cuts are an unintended consequence of a formula, established under laws passed in 1989 and 1997, that was supposed to establish a “sustainable growth rate” for spending on doctors’ services. The formula allows Medicare spending on physician services to grow at the rate of the gross domestic product (GDP), but it actually penalizes physicians because the cost of physician services rises more rapidly than the GDP.

Reimbursement for all other Medicare providers is calculated using the Medicare Economic Index (MEI), which is a market index of actual medical practice costs. Health plans, hospitals, and nursing homes are all seeing payment increases, while physician payments are being slashed.

The inequities are glaring:

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Congressional leaders have hinted that they may only be able to freeze payments at 2005 levels. With practice costs increasing at a rate of 4 to 6 percent a year, a payment freeze would essentially be a pay cut.

Tell your members of Congress that a payment freeze is not acceptable and urge them to dump the flawed SGR physician payment formula and replace it with a new formula based on the MEI, which would increase physician payments by 2.8 percent in 2007.

Although fixing the SGR is CMA’s top Medicare priority, the association continues to urge Congress to fix the outdated geographic payment localities. The Medicare geographic payment formula includes a geographic adjustment factor (GAF) that adjusts the payment rate for local geographic market conditions. The goal is to base physician reimbursement on what it costs to provide care in a particular geographic region. The formula calculates a geographic adjustment factor for each county and assigns each county to a Medicare payment locality.

Unfortunately, the payment locality assignments have not been updated in 10 years, and the last update was made using 1966 demographic data. Practice costs in many recently urbanized counties have increased dramatically, yet the counties remain inappropriately grouped into payment localities with lower-cost counties. The result is that physicians in 174 counties in 32 states are paid up to 14 percent less than they should be according to their GAF. The ten most underpaid counties in California are Santa Cruz (-10.2 percent), Sonoma (-8.2 percent); Monterey (-6.7 percent), Marin (-6 percent), San Diego (-5.5 percent), Sacramento (-4.6 percent), Santa Barbara (-3.5 percent), El Dorado (-3.3 percent), Placer (-2 percent), and San Luis Obispo (-1.2 percent).

Physicians in Santa Cruz, for example, are paid 25 percent less than their neighbors in Santa Clara. The low payment rates in Santa Cruz have forced ALL local physicians to stop accepting new Medicare patients, requiring many Santa Cruz seniors to travel more than 25 miles to find a physician.

Current federal law requires changes in the Medicare program to be budget neutral. If the Centers for Medicare & Medicaid Services (CMS) were to simply reassign these underpaid counties to more appropriate payment localities, the budget neutrality requirement would result in a 4 to 6 percent cut for counties remaining in those localities.

CMA is therefore proposing a new money solution that would allow any county whose county GAF exceeds its locality GAF by 5 percent to move to its own locality and be reimbursed at the geographically appropriate rate. CMA’s proposal would also protect the physicians in counties remaining in the original payment locality by establishing a geographic payment floor at current levels.

Physicians are urged to meet with their members of Congress while the members are in their home districts during the August recess. Tell them that failure to reform the Medicare payment formulas will make it more difficult for seniors to find a physician and further jeopardize access to care for seniors. If you don’t have time for a face-to-face meeting, please call your representative’s office to register your position. Please also urge your representative to show the House leadership that he or she supports Medicare payment reform by cosigning both the SGR and geographic payment “Dear colleague” letters that are circulating in Congress.

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