President's Medicare Budget
Proposes Fix for Physicians; Opens Door to Potential Hospital
Cuts
February 7, 2003 - The President's FY 2004 budget
proposes over $400 billion in Medicare spending over 10 years
to support the President's framework for Medicare modernization.
While the Medicare budget lacks details about the President's
reform proposal, the budget does acknowledge the problematic
physician payment formula and commits to changing it. It does
not, however, recognize other provider payment cuts, such
as Medicare Indirect Medical Education (IME) payments, and,
in vague language, opens the door to additional provider reductions.
Specifically, the budget "builds upon the President's
framework for Medicare modernization, including access to
a subsidized prescription drug benefit, better insurance protection,
and better private options for all beneficiaries." While
it is not yet clear how the drug benefit would be delivered,
payment to Medicare+Choice plans would be linked to the cost
of providing health care services, and preventive benefits
would be improved. Fee-for-Service improvements are also proposed,
including catastrophic coverage and a "more rationalized
system of cost-sharing."
The provider payments section of the Medicare budget recognizes
the inadequacy of physician payment formula and proposes to
"adjust the formula to use actual data instead of estimates
in current and previous updates." The summary document
suggests that physician payment updates would be higher, but
does not indicate whether the improved updates would in fact
be positive.
Also included in the provider payments section is a statement
that could mean that provider payments could be a source of
funding for Medicare reform. "We work with Congress to
monitor payments to other providers," states the document,
"as many sources have found that some providers are being
overpaid, and these overpayments could be used to modernize
the Medicare program." In January, the Medicare Payment
Advisory Commission (MedPAC) adopted several recommendations
to reduce provider payments, but rejected a staff recommendation
to further reduce IME payment from 5.5 to 2.7 [see Washington
Highlights, Jan. 17]. It has been reported that MedPAC's
recommendations and extension of expiring provisions from
the Balanced Budget Act of 1997 could be included in the administration's
Medicare reform proposal that will be sent to Capitol Hill
in the coming weeks.
The budget also proposes $201 million in provider user fees
for FY 2004 that would allow the Secretary of Health and Human
Services to assess providers fees associated with the submission
of duplicate or unprocessable claims. Fees could also be assessed
to providers who wish to elevate a fee-for-service appeal
to the Qualified Independent Contractor level of adjudication.
Information:
Lynne Davis Boyle, Assistant Vice President
AAMC Office of Governmental Relations
ldavisboyle@aamc.org
(202) 828-0526
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