March 2003

Congress Approves Medicare Fix

Although no paper is available outlining the specific details of the agreement, staff involved in the House and Senate 2003 Appropriations bill negotiations report that the package includes the a "fix" to the Medicare physician payment formula problem. The solution included in this final package, however, was significantly different from the language passed earlier by the Senate.

Rather than adopt a temporary fix, as originally approved by the Senate, the conferees and the White House agreed to a long-term solution that is similar to language proposed last year by Congressman Bill Thomas (R-CA) authorizing the Secretary of HHS to fix the formula problem.

Unlike the original Thomas proposal, the language in the House-Senate compromise would phase in the Secretary's authority. The phase-in would mean that actual cuts in physician payments would not occur but the amount of the increases would not be as high as they might have been had the fix been adopted without the phase-in. The phase-in would occur between now and 2007.

Specifically, the Omnibus Appropriations bill will effectively authorize the Secretary of HHS to make adjustments to the physician payment formula to "correct" any errors the Secretary identifies in the formula. This will allow the HHS Secretary to adjust the formula to avoid the scheduled 4.4-percent reduction and could in fact, result in a payment increase (1.6 percent) beginning March 1. This approach should also prevent future reductions from occurring as a result of formula errors.

The approach approved by the House-Senate Conference comes with a much higher price tag than the original fix approved by the Senate. According to an informal analysis performed by the Congressional Budget Office, authorizing the HHS Secretary to make the necessary adjustments will result in an increase in Medicare outlays for physician services of approximately $45 billion over the next 10 years. The original Senate fix froze physician payments at the 2002 level through September 30, 2002 and resulted in increased Medicare expenditures of several hundred million dollars in 2003.

Source: ChiroCode Institute ChiroTalk

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