August 2005

CMS proposes cut in payments

Payment rates for physicians’ services would be reduced by 4.3 percent in 2006, according to rule proposed by the Centers for Medicare and Medicaid Services (CMS). The reduction is required by a statutory that takes into account substantial growth in overall Medicare spending in 2004.

CMS expects to pay approximately $56.5 billion to 875,000 physicians and other health care professionals in 2006, according to its proposed rule released. The proposed rule would expand Medicare coverage of glaucoma screening; expand access for rural beneficiaries enrolled in Medicare Advantage plans to services of federally qualified health centers (FQHCs); reform payment for multiple imaging procedures performed on a beneficiary at one session; and revise payment for inhalation therapy and end stage renal disease (ESRD) treatment.

The physician fee schedule specifies payment rates to physicians and other providers for more than 7,000 health care services and procedures, ranging from simple office visits to complex surgery. The fee schedule is updated on an annual basis according to a formula specified by statute. 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, projected growth in the number of beneficiaries in fee-for-service Medicare, and changes in law or regulation.

If actual spending exceeds the target, or SGR, as it has the past several years, then the law requires CMS to reduce the update factor. The final rule will contain details of the methodology for calculating the SGR.

The proposed rule was to be published in the August 8, 2005 Federal Register. CMS will accept comments on the proposals until September 30, and publish a final rule later this year.

More details may be found on these programs on the CMS Web site, www.cms.hhs.gov.

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

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