President Bush last week signed legislation to stop the 5 percent Medicare sustainable growth rate (SGR) cut that was scheduled to take effect January 1. The legislation will freeze the Medicare conversion factor for physician reimbursement at 2006 levels for one year and will give a 1.5 percent SGR increase to physicians who report on at least three quality measures starting July 1, 2007. The Centers for Medicare and Medicaid Services (CMS) will implement the Medicare physician payment provisions of this law (HR 6111) immediately.

The freeze only applies to the 5 percent SGR cut, and will not affect the changes to the work relative value units (RVUs) stemming from Medicare’s recently completed five-year review. This means that payment rates for many services will change in 2007.

The new work values will increase spending for E&M services by $4 billion next year. However, federal budget neutrality requirements forced CMS to apply a 5.5 percent reduction to all services. The bottom line: Some physicians will still see net decreases in Medicare payments in 2007, but those decreases will be much smaller than they would have seen without the SGR freeze. And many physicians will see net increases. A chart of the average rate change by specialty is available here.

The new rates will be posted to Medicare carriers’ websites no later than December 31 and the carriers will be ready to process claims at the new rates on January 1.

CMS has also extended the Medicare participation enrollment period. Physicians who wish to change their Medicare participation status for 2007 have until February 14 to do so. Changes in participation status will be effective January 1, retroactively if necessary, regardless of when the participation decision is made.

A participating physician must accept Medicare allowed charges as payment in full for all their Medicare patients. A nonparticipating provider can choose to accept or not accept assignment on Medicare claims on a claim-by-claim basis. Once made, Medicare participation decisions are binding for the entire year.

Physicians may also choose to opt out of the Medicare program entirely. Physicians who opt out of Medicare are bound only by their private contracts with their patients (although Medicare specifies that these contracts contain certain terms). You may choose to opt out at any point in the year, but once you opt out, you cannot opt back in for two years.

For more information on Medicare participation decisions, CMA encourages physicians to read CMA ON-CALL document #0151, “Medicare Participation (and Nonparticipation) Options.” ON-CALL documents are free to members at the members-only website. Nonmembers can purchase ON-CALL documents for $2 per page in the CMA bookstore.

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