Physicians can expect a 5.1 percent pay cut in Medicare reimbursement starting Jan. 1 if one of many proposed revisions to 2007 payment rates and policies makes it into CMS’ final rule, to be made Nov. 1. Although some members of Congress presented legislation aimed to fix the payment formula, lawmakers failed to pass any of the bills before adjourning for the campaign season. Members of the House Energy and Commerce Committee, such as Chairman Joe Barton (R-Tex.) and Charlie Norwood (R-Ga.), have vowed to continue working on a solution over the next month and a half to fix the payment system and AAFP government relations representative Jerome Connolly recognizes a chance for action during a post-election “lame duck” session or into the New Year. Some physician groups and lawmakers, including AAFP President Larry Fields, M.D., predict dire consequences for physicians if the cut goes through.

“We can’t live with this cut or even the threat of a cut,” Fields said in an AAFP News Now story. “It’s difficult for family physicians to plan for the future when they are unsure of their income. It also is hard on patients, who live with uncertainty about whether their physicians will leave the program.”

An exodus of physicians from the Medicare program is exactly what a recent American Medical Association study predicts. Out of the 8,217 physicians polled earlier this year, almost half — 45 percent — said that they plan either to decrease or to stop seeing new Medicare patients if the cuts go through. The largest impact could be on the thinly stretched physicians who provide rural outreach services. More than one-third of these physicians report that they will discontinue services next year if the 5-percent cut goes through. By 2015, if the Medicare payments continue to be reduced, more than half of rural physicians say they will discontinue their services to Medicare patients.

A spokesperson for the Centers of Medicare and Medicaid Services expressed few concerns with the AMA study and cited a CMS news release that estimates that the 875,000 participating physicians and other health care professionals will receive approximately $61.5 billion in reimbursements in 2007. CMS public affairs specialist Ellen Griffith also reported an extremely high 2006 physician participation rate for Medicare — 94.7 percent, which means that almost 95 percent of physicians accepted Medicare pay rates as payment in full. She added that the participation rate has risen each year since 1993 and that an alternative to physicians dropping out of the program would be for them to not accept full Medicare payment rates, and simply charge the beneficiary more for services.

“If you look at the bottom line, Medicare is the best payer,” Griffith says. “We reimburse physicians quickly and accurately.”

Some of the proposed solutions to fix the Medicare physician fee schedule center on either scrapping a part of the controversial reimbursement formula, giving bonuses to physicians who participate in quality initiatives like pay for performance, or both.

The Medicare physician fee schedule is currently updated annually according to a formula that uses the sustainable growth rate or SGR — the set rate of growth calculated with medical inflation, projected economic growth, projected growth in the number of Medicare beneficiaries and any changes to laws or regulations. The SGR is used to adjust the Medicare economic index or MEI. The MEI is a measure of inflation based on practice costs and general wage levels of physicians.

Rep. Joe Barton introduced a bill in September that proposes providing a small positive update for physicians over the next three years with an additional bonus for physicians participating in the quality initiatives. The legislation also calls for a demonstration program for 2008-2009 that would show the effectiveness of a medical home.

Rep. Michael Burgess, M.D., an obstetrician from Lewisville, Texas, introduced a bill in July to the U.S. House of Representatives that proposes to give physicians a pay increase for 2007 and thereafter link the annual physician payment formula to the MEI, not the SGR. Through his action, he hopes to give physicians “a more stable and predictable payment” on which they can base their practices, says Josh Martin, legislative director for Rep. Burgess.

At the 57th Annual Session and Scientific Assembly, AAFP’s Fields gave the closing keynote address to Texas physicians about the value of family medicine. In his talk he addressed the Medicare changes and the SGR-heavy formula.

“That particular group of letters — SGR — only occurs in two other places in the English language: in the words disgraced and disgruntled,” he said. “It is a disgrace that the Congress of the United States has been unwilling to grapple with this and create disgruntled doctors and disgruntled patients.”

Fields said AAFP would work with other groups to find a permanent fix to the payment formula so that patients wouldn’t have to worry about losing access to care. On Sept. 28, AAFP Congress of Delegates speaker Thomas Weida, M.D., testified to the House Committee on Energy and Commerce’s Subcommittee on Health, of which both Rep. Burgess and Rep. Barton are members. Other groups in attendance included the American College of Surgeons, the American Medical Association, the American Association of Retired Persons, the American College of Physicians and American Health Quality. Each speaker expressed concern about the Medicare physician payment formula and proposed a permanent fix to the SGR.

The new payment system, Weida said, should include the adoption of a medical home model; use of the MEI, not the SGR, to determine physician payment; and voluntary quality reporting. All attendees agreed that the concept of a medical home and coordination of care is appropriate, but that the coordinator should be qualified to serve as a comprehensive caregiver. Participants addressed AAFP’s workforce study that predicts a physician shortage by 2020 and agreed that a separate hearing about a primary care shortage would be worthy of its own hearing.

The hearing also addressed the value of care and speakers recommended more compensation for “cognitive medicine” versus “technical medicine.” Higher reimbursement for evaluation and management services is one adjustment already likely to make it into CMS’s final rule for 2007. The American Medical Association’s Relative Value Committee recommended increasing the work value of E&M codes, which means higher reimbursement for the primary care physicians who commonly use these services for disease prevention and chronic disease management. Medicare would redistribute about $4 billion around the specialties, giving family physicians an estimated 5-percent pay boost. With the increased reimbursement for E&M codes along with accurate coding, a normal full-time physician could earn an extra $30,000 “pure and simple, just by doing the same work you’re doing,” Fields said. For family physicians, the 5-percent increase in E&M codes could offset the potential 5.1-percent Medicare payment cut.