Urologists, MedPAC agree: 'Everything is not OK'

March 1, 2008

The Medicare Payment Advisory Commission is expected to recommend to Congress this month that it increase average Medicare physician fees by 1.1% for 2009, rather than allowing a scheduled 5% reduction to take effect.

The recommendation will be presented in MedPAC's March Report to Congress, even as lawmakers must deal with extending a temporary .5% Medicare pay raise that was enacted late last year for the first 6 months of 2008 to avoid a 10.1% cut that had been scheduled. If no action is taken, the full cut will be imposed beginning on July 1.

Pointing out that many physician groups have been attempting to reform the Medicare payment system and toss out the Sustainable Growth Rate (SGR) formula that is blamed for much of the update cuts scheduled to continue through 2016 unless action is taken, Dr. Castallanos called the 6-month fix passed by Congress "a fiasco."

He said physician costs are increasing dramatically-some estimates say by as much as 40% since 2001-but the conversion factor used to set rates has not changed.

"We really haven't had an increase, but our costs are continuing to go up," he said.

Dr. Castallanos' comments came during a discussion following the MedPAC staff's recommendation of the 1.1% increase, which would be based on the projected change in "input prices" for physicians services, less the commission's expectation for productivity growth.

"Based on our current estimates of the input price increase, which is 2.6% for 2009, and the expected productivity in-crease, which is 1.5%, the resulting 2009 update recommendation is approximately 1.1%," explained MedPAC policy analyst John Richardson. "Compared to the projected negative 5.0% update that would occur in 2009 under current law, the recommended update of 1.1% would stabilize the physician payment system while Medicare moves forward to improve the value of physician services it purchases."

Richardson said the 1.1% raise would cost more than $2 billion in 2009 and more than $10 billion over the next 5 years. It would also result in an unspecified increase in Part B insurance and coinsurance amounts for physician services, he added.

Dr. Castallanos agreed with other commissioners who questioned whether productivity is a suitable factor to consider when determining Medicare fees. He said the update is "a blunt tool for trying to constrain costs," which "creates a lot of pressure on the physician societies that have high costs."

"So what are we doing to these people?" he asked. "We are squeezing them even tighter. This is a group that we want to try to protect."