The annual Medicare physician price cut season is on us. Next year’s reduction will average 5%, although payments for office visits (evaluation and management codes) will increase by up to 30%, but reimbursement for other procedures will be slashed up to 20%.
Don’t expect this to actually happen; every year the Medicare reductions are reversed by Congress. And this year will be no different. I’d expect Congress will do something to reverse the cuts, at least in part.
The reduction is in large part due to a higher than expected jump in Medicare payments to physicians in 2004, when costs increased by 10% over the previous year. According to Medicare’s formula, when utilization increases, prices have to drop to ensure the total program cost comes in at budget.
Not that this has worked in the past; in fact docs have always managed to increase total compensation enough to outweigh the per-procedure cuts.
In total, CMS expects to pay docs over $60 billion next year.
Meanwhile, hospital reimbursement is slated to go up 3% on average. As one would expect, the AMA is not happy. And when the AMA is not happy, especially in an election season, they exert their considerable force on congresspeople to help them understand the plight of the doctor.
We really need some adults to step in.
What does this mean for you?
As Medicare’s rates are used as the basis for reimbursement by group health plans, workers comp fee schedules and other payers, the pulling-and-pushing will be fierce, with insurers stuck with the result of this painful process.
