Energy and Commerce Republicans
Urge CMS to Remove Drug Costs from Physician Update Calculation
June 6, 2003 - House Energy and Commerce Committee
Chairman Billy Tauzin (R-La.) and Health Subcommittee Chairman
Michael Bilirakis (R-Fla.) sent a June 3 letter
to Centers for Medicare and Medicaid Services (CMS) Administrator
Tom Scully requesting the removal of Medicare-covered drugs
from the sustainable growth rate (SGR) target used to calculate
the annual physician payment update. Although drugs are not
included under the physician fee schedule, drug expenditures
are included in the SGR calculation, with the intent of discouraging
unnecessary prescribing. Citing the rapid and significant
rise in drug costs, the Tauzin/Bilirakis letter states "the
underlying [SGR] formula no longer accurately reflects true
physician service costs."
In May 2002, the AAMC, AMA, and several physician specialty
groups released a detailed analysis that offered a similar
conclusion regarding the impact of drug costs on physician
update calculations. The AAMC has continued to communicate
its concern that including drugs in the SGR greatly increase
the likelihood of continued negative updates. CMS has projected
a negative 4.2 percent update in CY 2004, with additional
reductions expected in CYs 2005, 2006, and 2007.
According to the Tauzin/Bilirakis letter, removing drugs
from the SGR could "soften the impact" of projected
cuts to the CY 2004 physician payment update "Such a
move is justified," the letter reads, "from both
a policy and a legal perspective…." While CMS acknowledges
its legal authority to address the drug issue, it consistently
opposes removal of the costs. CMS believes that including
drug costs in the SGR provides a strong incentive for physicians
to exercise restraint in the delivery of Medicare-covered
drugs.
:Information:
Christiane Mitchell, Senior Legislative Analyst
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
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