CMS Proposes Cuts to Geographic Payments for Many California Counties
[Posted 07/19/07]

The Centers for Medicare & Medicaid Services (CMS) recently proposed changes to its geographic payments. Under the proposed formula, many California counties would see significant “geographic adjustment factor” (GAF) reductions over the next two years. Most major urban centers around the country would see geographic payment reductions as well. These cuts would be in addition to the 9.9 percent across-the-board cuts mandated by the broken sustainable growth rate formula.

CMA is particularly concerned that physicians in the northern Bay Area will see GAF reductions of 4 to 9 percent. The GAF adjusts payment rates so that physicians are reimbursed based on what it actually costs to provide care in their particular geographic region. CMA has requested from CMS the geographic practice expense data it used to calculate the proposed GAF changes so that the association can verify the agency’s calculations.

The CMS proposal also sets forth three options for updating California’s payment localities. Counties are also grouped into Medicare payment “localities,” theoretically with other counties with similar practice costs. Because the payment localities have not been updated in 10 years, many recently urbanized counties remain inappropriately grouped into payment localities along with lower-cost (mostly rural) counties.

The three proposals reassign underpaid counties into new or more appropriate localities so that they can be reimbursed based on more accurate geographic practice costs. Unfortunately, because federal law requires changes in the Medicare program to be budget neutral, all three options would require some localities to suffer additional payment cuts to offset the increases for the most severely underpaid counties. CMA does not support any of these options in their current form. CMA policy requires the association to advocate for a solution that does not substantially penalize physicians remaining in the affected localities.

CMA is sponsoring a bill (HR 2428) that would require CMS to move any county whose county GAF exceeds its locality GAF by 5 percent to its own locality and be reimbursed at the geographically appropriate rate. The bill would require CMS to update the payment localities every three years using the 5 percent threshold. The legislation would also protect the physicians in counties remaining in original payment localities by establishing a geographic payment floor at current levels.

Click here for information about CMS's geographic payments proposal.

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