Advocacy News

Medicare Announces Physician Pay Changes for 2003

12/20/2002—The Centers for Medicare & Medicaid Services (CMS) announced today a final rule that will update physician payment rates under the Medicare physician fee schedule for 2003. The rule also revises a number of other policies affecting Medicare Part B payment for physicians and other providers.

The final rule, which will be published in the December 31 Federal Register, will be effective on March 1, 2003. Services provided on or after January 1 and before March 1 will be paid under the 2002 fee schedule.

The fee schedule specifies rates paid to physicians for more than 7,000 health care services and procedures ranging from routine office visits to complex surgical procedures. In 2003, Medicare is expected to pay approximately $44.9 billion to over 750,000 physicians and other practitioners for services paid under the physician fee schedule. Under the final rule, the physician fee conversion factor, which adjusts the base calculation for all physician services, will be reduced by 4.4 percent, beginning March 1, 2003, although total physician spending will increase by 2 percent in 2003.

"In the rule we are announcing today, CMS has done everything it can to shore up physician payments for 2003, but only Congress has the authority to fix the formula," said CMS Administrator Tom Scully. "CMS refined the methodology for calculating the rate of inflation in providing physicians' services by adjusting the measure of productivity." As a result, physicians will see a reduction of *4.4 percent rather than the *5.1 percent reduction that would have occurred without the change. "These methodological adjustments translate into an additional $14.5 billion in Medicare payments to physicians over the next ten years," said Scully.

"CMS recognizes that this will be the second year in a row in which physician fees will be affected by a negative update for the conversion factor," said Scully. "The reduction in physician fee schedule rates results from a formula specified in the Medicare law, and we believe that formula is flawed and must be fixed. Although Congress considered several options for fixing the fee schedule formula for 2003, and the House actually passed a bill to address these issues, no final action was taken before Congress adjourned."

CMS is expanding its efforts to monitor beneficiary access to physician services, both nationally and in local healthcare markets, as it expects the reduced rates to cause fewer physicians to accept Medicare rates as full payment, and also may cause fewer physicians to accept new Medicare patients.

Almost 90 percent of physicians accept Medicare assignment today, and as yet CMS has not seen access problems. However CMS expects that may change after these rates take effect.

"Nothing would make us happier than to not be issuing this rule today. But after months of extensive review of the law and the formula, it is clear that this is the appropriate update required by the existing statute. The Administration has been, and continues to be, anxious to work with Congress to fix the flaws in the formula * as soon as possible. We want doctors, and patients, to see Medicare as a trustworthy partner in providing quality services. Fixing the formula to provide an accurate update (which we think should be 1.6 percent for calendar year 2003) is essential to restoring that trust," said Scully.

"There is not much good news in this rule, but on a happier note, in keeping with the Administration's and the Secretary's emphasis on preventive services, the final rule nearly doubles the Medicare payment for administration of some vaccine immunizations, including flu shots, from $3.98 to approximately $7.26," said Scully. CMS believes this more appropriately reflects the resources used to administer flu shots.

The final rule also expands the type of colorectal cancer screening tests that may be eligible for coverage. Studies have shown that the incidence of colorectal cancer can be reduced by as much as 20 percent and deaths by as much as 33 percent through early and annual screening with a simple fecal occult blood test.

In addition, the rule ensures access to care for rural beneficiaries who are served by critical access hospitals in frontier and remote areas and offers relief to the physicians and other providers who staff these hospitals. The rule permits staffing by a registered nurse during temporary periods when a physician or other qualified provider is not available.