Doctors facing 4.2% cut in Medicare payments

WASHINGTON — WASHINGTON - Bush administration officials say they expect to cut Medicare payments to doctors by 4.2 percent next year unless Congress passes legislation to reduce or eliminate the cut.

In a proposed rule to be published Friday, the administration says the cut is required by the existing Medicare law. Many doctors and some members of Congress disagree.


Medicare officials said that Congress could avert the cut as part of legislation to add drug benefits to Medicare, the health insurance program for 40 million elderly and disabled people.

But there is no guarantee that Congress will finish work on the legislation before Jan. 1, when the cut is scheduled to take effect.


Administration officials said the cut in Medicare payments to doctors would not harm beneficiaries or hurt their ability to obtain care.

But doctors said the new cut, following a 5.4 percent cut last year, would give them a fresh incentive to limit the number of elderly patients they serve.

"Physicians want to keep treating Medicare patients, but there comes a point where it is just not economically reasonable," said Dr. Donald J. Palmisano, president of the American Medical Association.

Maureen K. Maxwell, a spokeswoman for the American Academy of Family Physicians, said that more than one-fifth of family doctors were not accepting new Medicare patients.

Marilyn Moon, a health economist, said: "This needs a lot of vigilance. As yet, it's not a crisis. But it could quickly turn into one."

Doctors repeatedly express concern that Medicare payments are not keeping up with their costs.

Medicare has different formulas to pay doctors, hospitals, nursing homes and other providers of care.

The program reduces payments to doctors whenever Medicare spending for their services exceeds a goal, the "sustainable growth rate," which is linked to growth of the nation's economy.


Medicare officials said the proposed cut for 2004 resulted from the fact that estimates of economic growth had declined below earlier projections, while the use of health care services by Medicare beneficiaries had grown more than expected.

The cut can be attributed to "slow growth in the economy and to a significant growth in physician outlays," the Department of Health and Human Services said.

An independent federal panel, the Medicare Payment Advisory Commission, said last year that Congress should repeal the existing formula and replace it with a system that more accurately reflects doctors' costs.

The administration will accept public comments on its proposal until Oct. 7. It could change the proposal in light of those comments or under pressure from Congress.

Doctors say that federal policies, including Medicare coverage for new services and diagnostic tests, have encouraged greater use of doctors' services and that patients often benefit.

The Senate and House Medicare bills provide prescription drug benefits costing roughly $400 billion over 10 years.


John C. Rother, policy director of AARP, the big lobby for older Americans, said, "Every penny that's available should be used to improve the drug benefits."

If Congress wants to increase payments to doctors, he said, it should do so in separate legislation.

In February, Congress spared doctors from a cut this year and decreed that they should receive a 1.6 percent increase in Medicare fees in 2003. Still, the cut last year and the proposed cut for 2004 mean that Medicare payments for a given service would be 8 percent lower next year than in 2001.

House Republicans, including two committee chairmen, Bill Thomas of California and Billy Tauzin of Louisiana, say the proposed cut results in part from serious flaws in the payment formula.

Thomas and Tauzin say, as do many doctors, that the Bush administration has the power to correct some of those flaws. The administration insists it cannot make the changes without action by Congress.

The Medicare drug bill passed by the House would increase Medicare payments to doctors at least 1.5 percent a year in 2004 and 2005.


The version passed by the Senate says that the payment formula is "fundamentally flawed" and that beneficiaries' access to care "may be compromised" if Congress does not intervene. The bill expresses the "sense of the Senate" but does not change the existing law.

House Republicans say the Bush administration has overstated the growth of Medicare spending on doctors' services by including amounts spent on certain prescription drugs furnished to patients in doctors' offices. Spending on these drugs has grown much faster than spending on doctors' services, they said.