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Part B drug proposal would curtail Medicare pay cuts after 2010

Washington -- The typically bleak outlook that marks the proposed Medicare fee schedule for the upcoming year was significantly brighter this time around for physicians looking for relief from impending pay cuts. In a major policy reversal from the previous administration, the Centers for Medicare & Medicaid Services has proposed removing physician-administered drugs from the calculation of the Medicare physician payment formula. Doctor pay is reduced across the board when spending on all physician services -- a category that includes Part B drugs -- exceeds annual targets. Removing the costs of the drugs would lessen the extent to which spending would exceed targets and trigger cuts. The CMS proposal, announced July 1, would not reduce next year's planned 21.5% across-the-board cut. But it would reduce the number of years after 2010 that physicians face reductions under the payment formula, and it also would decrease the size of the cuts that remain. Over the next five years, projected doctor pay updates of between -6.3% and -5.4% would be replaced with updates of between -3.1% and 1.4%, said Jonathan Blum, director of the CMS Center for Medicare Management. This means Medicare would pay physicians $45.4 billion more over those five years than it would if the physician-administered drugs remained part of the pay formula. The move also could make it more affordable for Congress to reverse the 21.5% cut and the additional future reductions mandated by the formula, because the five-year cost to lawmakers of legislating such a change would go down by the same amount. Unless Congress designates offsets for the $45.4 billion, however, that spending would be added to the federal deficit. The American Medical Association, which along with other physician organizations has been pushing for the removal of physician-administered drugs from the Medicare payment formula since 2002, called the proposed move a historic victory for doctors and their patients. "We are very pleased that the Obama administration agrees with the AMA that drugs do not belong in the physician payment formula," said AMA President J. James Rohack, MD. "Instead of yet another Band-Aid fix, today's action paves the way for Congress to ensure stable payment rates that reflect increasing medical practice costs and preserve seniors' access to care." A new legal outlook The AMA has maintained all along that CMS had the authority to take Part B drugs out of the equation retroactively at any time. But the Bush administration steadfastly refused to make the administrative change, saying it did not have the statutory authority under Medicare law to carry out the move. CMS under Obama came to a different conclusion. "Clearly, the fact that the Obama administration now thinks it can take it out shows you the legal interpretation could go either way," said Mark B. McClellan, MD, PhD, who made the decision against the policy change while serving as CMS administrator in the Bush administration from 2004 to 2006. "This is something that was reviewed every year, and there were legal arguments on both sides." Although the proposed formula change is retroactive to 1996, it would not revise any pay rates before 2011. "Keep in mind this is an accounting change going forward. It's a commitment to spend additional funds for physicians, and this is one step in acknowledging that overall physician spending in the future will be higher," said Dr. McClellan, now director of the Engelberg Center for Health Care Reform and a senior fellow at the Brookings Institution, a public policy organization based in Washington, D.C. He noted that Congress still has a long way to go in making Medicare physician spending more sustainable in the long run. The proposal is not a done deal unless CMS includes the provision in the final 2010 physician fee schedule rule, which typically comes out by Nov. 1. CMS included language in the proposal allowing for the plan to change between now and then "in light of new policy developments, new information or changed circumstances." Blum said CMS is mindful that this administrative change is occurring against the backdrop of health reform discussions on Capitol Hill. "So we want to make sure that our proposals are consistent with overall reform priorities." More help for primary care CMS' proposed fee schedule also would refine Medicare physician payments in ways that are expected to increase payment rates for primary care services by reducing some specialist pay. The most significant change would update the practice expense component of physician services starting in 2010. To value services more accurately, CMS is proposing to incorporate cost data from the AMA-conducted Physician Practice Information Survey. The agency also proposed stopping payment for consultation codes, which typically are billed by specialists and paid at higher rates than regular evaluation and management services. CMS said it would redirect more of the portion of Medicare's payment for professional liability insurance to physicians with the highest liability premium costs. Taken as a whole, these actions would increase average total payments to general practitioners, family physicians, internists and geriatricians by 6% to 8%, CMS said. Some primary care physician organizations praised the proposals. "We think it goes a long way toward helping improve payment for primary care," said James King, MD, chair of the board at the American Academy of Family Physicians. "We have a work force shortage of primary care physicians, so we need to help people choose the field." But organizations representing specialists whose services would sustain rate reductions because of the relative value revisions said the cuts go too deep. The American College of Cardiology questioned the validity of practice expense data from the AMA survey and was critical of the agency's process in adopting it. "We believe this is a significant departure from previous policy and may be a violation of statute," said Alfred Bove, MD, the ACC's president. "Given the extensive discussion of previous surveys in previous rules, the ACC is concerned about the very brief discussion of the new survey in this proposal." Additional proposed rate and policy changes in the rule would reduce payment for services that require the use of expensive imaging equipment. CMS says the reductions are necessary to control rapid imaging spending growth, but physicians who use the technology disagree. CMS is accepting comments on the proposed rule until Aug. 31. 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