2nd UPDATE: Medicare: Drug Costs Taken Out Of Physician Pay
The federal government on Wednesday announced that it intends to
remove the cost of prescription drugs from its formula for
determining payments from the Medicare program to physicians.
The move is expected to help keep Medicare payment rates for
physicians from dropping in future years. The White House budget
for 2010 had suggested that the cost of physician-administered
prescription drugs could be taken out of the formula as a way to
stabilize payment rates, and the Centers for Medicare and Medicaid
Services made the change official Wednesday.
CMS, in a statement, said the change "would reduce the number of
years in which physicians are projected to experience a negative
update" to their payment rates.
American Medical Association President J. James Rohack in a
statement called the CMS announcement "a major victory for
America's seniors and their physicians."
The proposed change, which won't take effect immediately, won't
have an effect on next year's physician payment rate. Under current
law, physician payment rates under Medicare are set to decline
21.5% in 2010 - but Congress is considered likely to take action to
stop the cut from taking effect.
Physician payment rates under Medicare are determined by a
formula created in 1997 to draw down the cost of medical services
under the program. If medical spending exceeds a target generated
by the formula, then physician payments are automatically reduced.
If spending falls lower than the target, then payments are
Physicians' groups for years have lobbied for Congress and CMS
to remove physician-administered drugs from the formula, since the
cost of drugs has risen faster than other medical services
considered under the formula.
Senate Finance Chairman Max Baucus, D-Mont., voiced support for
the removal of prescription drugs from the formula last year in a
part of a broad-spanning health policy paper.
An increase in payment rates for physicians under the Medicare
program could be welcome news for privately run Medicare plans,
known as Medicare Advantage plans. Their growth rate -- and their
payment rates from the federal government -- are determined in part
by the federal government's payment rate to physicians.
The 2010 Medicare Advantage payment announced in February
results in a 4% to 5% cut in payments to insurers, in part because
of the projected cut in Medicare payments to doctors.
Medicare Advantage plans enroll more than 10 million elderly
patients and are a major source of business for Medicare-focused
insurers, such as Humana Inc. (HUM), Health Spring Inc. (HS) and
Universal American Corp. (UAM).
CMS on Wednesday also said it would seek policy changes to steer
larger payments toward primary-care physicians. One of those would
increase the payment rate for a routine medical exam known as the
"Welcome to Medicare" doctor's visit. It also said it would
eliminate payments for specialists who currently bill Medicare
under "consultation codes" and instead pay the specialists using a
Another proposed change would reduce payment for costly
medical-imaging services. CMS said current payment rates are
provided under the premise that imaging equipment is being used 50%
of the time, a percentage which surveys say is too low.
-By Patrick Yoest, Dow Jones Newswires; 202-862-3554;