GAO speaks with forked tongue about Medicare physician fee schedule; physicians are on the warpath

In its July 21 report, Medicare Physician Services: Use of Services Increasing Nationwide and Relatively Few Beneficiaries Report Major Access Problems, GAO-06-704, the GAO paints a rosy picture of physician services utilization and reimbursement, as summarized in the report’s abstract:

In general, from April 2000 to April 2005, an increasing proportion of beneficiaries received physician services and an increasing number of physician services were provided to beneficiaries who were treated. This trend was evident in every state’s urban areas and nearly every state’s rural areas. Two other access related indicators–the number of physicians billing Medicare for services and the proportion of services for which Medicare’s fees were accepted as payment in full–increased from April 2000 to April 2005. These increases suggest that there was no reduction in the predominant tendency of physicians to accept Medicare patients and payments. The increases in utilization and complexity of services GAO observed demonstrate that beneficiaries were able to access physician services.

Sounds like everything is copasetic, until you take a look at the GAO’s testimony presented just four days later: Medicare Physician Payments: Trends in Service Utilization, Spending, and Fees Prompt Consideration of Alternative Payment Approaches, GAO-06-1008T.  The abstract of this testimony states:

In 2002, the system Medicare uses to determine annual changes to physician fees–the sustainable growth rate (SGR) system–reduced fees by almost 5 percent. Subsequent administrative and legislative actions averted fee declines in 2003 through 2006. Absent additional actions, fee reductions are projected for 2007 through 2015.

. . .

To moderate Medicare spending for physician services, the SGR system sets spending targets and adjusts physician fees based on the extent to which actual spending aligns with specified targets. If growth in the number of services provided to each beneficiary–referred to as volume–and in the average complexity and costliness of services–referred to as intensity–is high enough, spending will exceed the SGR target. While the SGR system allows for some volume and intensity spending growth, this allowance is limited. If such growth exceeds the average growth in the national economy, as measured by the gross domestic product per capita, fee updates are set lower than the estimated increase in the average cost of providing physician services. A large gap between spending and the target may result in fee reductions. There are two principal reasons why physician fees are projected to decline under the SGR system. Recent growth in spending due to volume and intensity increases has been more than double that allowed under the SGR system, resulting in excess spending that must be recouped through reduced fee updates. Legislative actions that specified minimum updates for 2004 through 2006 have also contributed to future physician fee cuts. These actions, which averted fee reductions, did not revise the spending targets. Therefore, the SGR system must offset the additional spending resulting from the excess volume and intensity and the minimum fee updates by reducing fees beginning in 2007.

Hence the proposed physician fee schedule published in late June, which I noted recognized that physicians are being underpaid, but could not add dollars to the pot absent legislative authorization.

According to AMA Chair Cecil Wilson, the current Medicare formula will result in a 4.4% reduction in physician reimbursements this year and a 37% reduction over nine years,

per the Kaiser Network’s Daily Reports. 

Organized medicine is now seeking legislative action to prevent this reduction in reimbursement, but while the Daily Reports’ sources say that " ‘[m]omentum is growing’ among lawmakers for the passage of legislation that would prevent the scheduled reduction in Medicare physician reimbursement," such legislative action is sufficiently "radioactive" that it will likely have to wait until after the November elections.