June 10, 2008

Senate Bill Would Halt Medicare Physician Pay Cut

This week, Senate Finance Committee Chair Max Baucus (D-MT) introduced broad Medicare legislation that would halt the 10% cut in Medicare physician payments scheduled to begin July 1, 2008 and a subsequent 5% cut in 2009. The legislation instead continues the 0.5% increase under current law for the rest of 2008 and mandates a 1.1% increase in physician payments in 2009. The legislation does not forestall expected cuts in Medicare physician reimbursement in 2010 and beyond. The bill further mandates that budget neutrality adjustments for 2007 and 2008 apply to the Medicare conversion factor instead of relative work value units for codes – this change will positively impact reimbursements for most practicing physicians.

The bill also extends the Physician Quality Reporting Initiative through 2010 and provides a 2% payment bonus for participating physicians. The bill requires the National Quality Forum to prioritize, endorse and maintain quality measures in all practice settings. The bill also directs the Department of Health and Human Services to provide PQRI participating physicians with confidential feedback to physicians regarding their resource us.

The bill also provides physicians with incentives to adopt electronic prescribing capability. Physicians for whom services identified by the PQRI e-prescribing measure represent at least 10% of their Medicare charges are eligible to receive a 2% bonus payment in 2009 and 2010 if they use a qualified e-prescribing system. The bonus is reduced to 1% in 2011 and 2012, and 0.5% in 2013. Beginning in 2009, physicians will not be eligible to receive a PQRI bonus payment for e-prescribing so there is no opportunity for a double bonus for both PQRI and e-prescribing. If physicians for whom these codes represent 10% of their charges do not use e-prescribing, they will face penalties of -1% in 2012, -1.5% in 2013, and -2% in 2014 and beyond. Incentive payments and penalties are based on allowed charges for all covered Medicare services, not just those included in the PQRI e-prescribing measure. Exceptions will be made for significant hardships (e.g., rural areas without sufficient Internet access).

Beneficiary Improvements are also part of the legislation, including:

• Increases the asset limits for beneficiaries to qualify for the Part D low-income subsidy.
• Provides Medicare coverage for “additional preventive services” determined by Secretary that identify medical conditions or risk factors recommended by the U.S. Preventive Services Task Force
• Waives deductible for “Welcome to Medicare” physical; expands timeframe for physical from 6 months to 1 year following enrollment in Medicare; and adds new services to this benefit, including “additional preventive services” and end-of-life planning.
• Eliminates copays for mental health services covered by Medicare over a 6 year period; provides 5% increase in fee schedule payment for specified mental health services from July 1, 2008, through December 1, 2009. Stipulates that increases are not budget neutral and therefore do not require offsetting reductions in other payments.
• Improves Medicare Part D coverage of off-label drugs to match Part B coverage.

The bill is paid for by cuts to Medicare Advantage (managed care) plans, cuts in oxygen and other durable medical equipment reimbursement.

Senator Baucus is reaching out to Republican Senators to build bipartisan support for the Medicare bill. Senator Grassley (R-IA) , ranking member of the Senate Finance Committee, is expected to release his version of a Medicare bill soon. The two bills are expected to be similar in nature with only minor policy and funding differences between the two.

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