WASHINGTON WIRE

In this issue, you'll find:

• MedPAC Approves Recommendations Regarding Payment Adequacy
• CMS Addresses Expected Changes to Physician Payments Under Reconciliation
• Report Finds Slowdown in Health Care Spending Growth
• Hearings

Top Story

MedPAC Approves Recommendations Regarding Payment Adequacy

The Medicare Payment Advisory Commission (MedPAC) met earlier this week to consider its recommendations on payment adequacy in the Medicare program.

The Commission recommended that Congress increase Medicare hospital inpatient and outpatient payments by 3.55 percent. Commission staff stated that while hospitals are running negative margins, the payments from private insurers offset those losses.

With regard to Medicare physician payments, the Commission recommended that Congress increase payments for physician services by approximately 2.8 percent. It was stated that this update would raise the cost sharing for beneficiaries but would not impact beneficiary access to physicians.

The Commission also discussed the current review process for codes and services. The Commission recommended the creation of a panel of experts to help the Centers for Medicare and Medicaid Services (CMS) in identifying appropriate values for services as well as review recommendations from the Relative Value Scale Update Committee (RUC).

In addition, the Commission discussed an alternative formula to the current Sustainable Growth Rate (SGR) used to calculate physician payments under Medicare. Citing the use of the SGR formula as flawed, the Commission suggested that Congress consider using multiple target pools based on geographic regions, type of service, or other means to control the rapid volume increases and differentiation between providers. The Commission stressed that before making any formal recommendations to Congress, further data analysis was needed.

The next MedPAC Commission meeting is scheduled for March 9-10, 2006.

Health Care News

CMS Addresses Expected Changes to Physician Payments Under Reconciliation

When House Members return at the end of January, it is expected that they will pass a final reconciliation bill making significant changes to both the Medicare and Medicaid programs. Included in those changes is a freeze in Medicare physician payments for calendar year (CY) 2006.

Because the current formula used to calculate Medicare physician payments calls for a 4.4 percent decrease in 2006 rates and the reconciliation provision to eliminate the payment decrease has yet to be enacted, physicians treating Medicare patients are currently faced with a significant reimbursement cut.

To address many of the payment issues physicians and Medicare contractors expect to face with enactment of the reconciliation legislation, the Centers for Medicare and Medicaid Services (CMS) sent a letter this week to House Ways and Means Committee Chairman Bill Thomas (R-CA) outlining the agency's plan.

The letter states that Medicare will issue instructions to contractors concerning the processing and reprocessing of claims once reconciliation legislation is enacted. Additionally, because the legislative language cites January 1, 2006 as the implementation date for the payment freeze, CMS also states that it expects contractors to automatically reprocess claims processed with the negative 4.4 percent update without requiring physicians to resubmit such claims.

Regarding beneficiary cost sharing, the letter indicates that the Office of the Inspector General (OIG) will likely not expect physicians to collect additional beneficiary co-payments once the legislation is passed. This is despite the fact that enactment of the reconciliation legislation would retroactively find cost sharing collected during this interim period to be less than the amount required.

Finally, CMS states that it will reopen the enrollment period for physicians to decide whether to sign Medicare participation agreements for 2006. The extended enrollment period will run for an additional 45 days following enactment of the reconciliation legislation. Participation agreements will be retroactive to January 1, 2006.

The House vote on the reconciliation conference report is tentatively scheduled for February 1, 2006.

Report Finds Slowdown in Health Care Spending Growth

A report published in the journal Health Affairs on Tuesday, January 10, 2006, found that health care spending growth decreased to 7.9 percent in 2004, the lowest level of increase in four years.

Total health care spending in 2004 was estimated at $1.9 trillion, accounting for 16 percent of the gross domestic product (GDP). Medicare spending increased 8.9 percent in 2004 with total costs reaching $309 billion while Medicaid spending growth decreased to 7.9 percent in 2004, down from an 8.9 percent increase in 2003. Meanwhile, private payers spending growth decreased to 7.6 percent in 2004, down from 6.6 in 2003. In terms of service areas, home health care spending appears to be the fastest growing with a 17.6 percent spending increase for such services.

An abstract of the report can be found at http://content.healthaffairs.org/cgi/content/abstract/25/1/18.

Upcoming Events

Hearings

Thursday, January 19, 2006

Committee on Homeland Security and Governmental Affairs
2:30PM
342 Dirksen Senate Office Building
Bilateral Malaria Assistance: Progress and Prognosis

For More Information

For further information on any topics discussed or publications listed, or to get copies of anything mentioned in this alert, please call (202) 466-6550 and ask for the Legislative Practice Group.

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