January 2005 | Vol. 23, No. 1

Medicare Announces New Preventive Benefits and Physician Payment Increases in Final Physician Payment Rule For 2005

The Centers for Medicare & Medicaid Services (CMS) last November issued Medicare's final rule for physician payment for 2005, with new benefits and higher payments for preventive services including a "Welcome to Medicare Physical" and increased payment rates to physicians. The expanded benefits and increased payments result from the Medicare Modernization Act of 2003 (MMA) and are included in the 2005 Physician Fee Schedule rule, which became effective January 1, 2005.

"This rule follows through on our commitment to make Medicare a prevention-oriented program," said HHS Secretary Tommy G. Thompson. "At the same time, we are also making sure that Medicare pays accurately for drugs and other services that physicians provide. As a result of the new law, Medicare beneficiaries will receive higher quality care and value for their premium dollar."

The Physician Fee Schedule sets rates for how Medicare pays more than 875,000 physicians and other health care professionals. In 2005, CMS projects that aggregate spending under the fee schedule will increase 4 percent to $55.3 billion, up from $53.1 billion in 2004. The spending increase is due in part to an MMA provision that increased physician payment rates by 1.5 percent, a move that negated a previous law's planned cut of payment rates by 3.3 percent for 2005.

In addition, the final rule implements a new "Welcome to Medicare Physical" for all new beneficiaries. This exam gives physicians the opportunity to make an overall assessment of a patient's health, and provide counseling on nutrition and other steps to stay healthy.

Medicare also provides new coverage for screening for cardiovascular disease and for diabetes.

"Too many beneficiaries haven't used services that make it possible to detect and treat illnesses before they lead to serious health problems and avoidable health care costs," said CMS Administrator Mark B. McClellan, M.D., Ph.D. "Under the new law, we've modernized Medicare to include preventive benefits and appropriate payments for these services, and we intend to close the prevention gap for seniors."

"We appreciate the input we received from specialty societies and patient advocates as we developed this final rule, and we look forward to continuing to work with them as we refine this system," Dr. McClellan said.

The final rule also enhances other physician payments. In addition to the 1.5 percent increase in physician payments, Medicare will also offer a 5 percent quarterly incentive payment to doctors practicing in "physician scarcity areas." Those areas are listed on the CMS website at www.cms.hhs.gov/providers/bonuspayment. Also, CMS will pay physicians who use telecommunications technology to provide monthly management services for rural beneficiaries who are on dialysis. As a result, CMS expects that rural beneficiaries with end stage renal disease will get better support for high-quality care.

The CMS final rule on Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2005 (dated 11/15/04) can be found on the CMS Published Regulations website page at www.cms.hhs.gov/providerupdate/regsum.asp#1429FC, look for CMS-1429-FC, published on 11/15/04.