November 2003

2004 Medicare fees down 4.5%

Doctors can expect to be paid 4.5 percent less for Medicare-billed services in 2004 they were paid this year. The Centers for Medicare & Medicaid Services (CMS) has announced a final rule that updates payment rates under the Medicare physician fee schedule for 2004 and revise a number of other policies affecting Medicare Part B payments under the fee schedule.

“The Medicare reform package now pending before Congress contains a provision that would adjust these payments for 2004,” said CMS Administrator Tom Scully. “However, CMS has no option other than to base this final rule on the current law. If Congress does pass legislation improving payments to physicians, CMS will implement the new payment rates as quickly as possible.”

The physician fee schedule is updated on an annual basis according to a formula specified by statute that is intended to control the rate of growth in spending for physician services.

The formula requires CMS to adjust the update up or down depending on how actual expenditures compare to a target rate, called the sustainable growth rate or “SGR.” The SGR, in turn, is calculated based on medical inflation, the projected growth in the domestic economy, increases in the number of beneficiaries in fee-for-service Medicare, and changes in law or regulation.

CMS is adopting several changes to the Medicare payment methodology in 2004. These include rebasing and revising the Medicare Economic Index (MEI), which measures inflation in physician practice costs and general wage levels. The MEI is one of the key components used to update physician payment rates. First, CMS is changing the base year used to determine the structure of costs for

To address concerns about rising premiums for professional liability (or medical malpractice) coverage, the MEI revisions will increase the weight given to the costs of the coverage. In addition, CMS will adjust the proportion of Medicare payments attributable to physician work, practice expense and professional liability insurance to match their weights in the MEI.

The change will generally benefit surgical and other physician specialties that have high professional liability rates. CMS is also revising the geographic factors that adjust payments to reflect the cost of malpractice insurance to better reimburse physicians affected by local market changes in insurance premiums.

CMS also is creating a number of new codes to improve the way Medicare reimburses physician care for dialysis patients.

“CMS is engaged in that legislative activity, which we expect to produce significant reform that we will swiftly implement. If Congress does not act in the coming weeks, CMS is prepared to quickly implement a final rule to address both AWP reform and appropriate physician practice expense adjustments,” said CMS Administrator Scully.

The final rule will be published in the November 7, 2003 Federal Register, and will become effective January 1, 2004.

Source: Centers for Medicare and Medicaid Services, www.cms.gov

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