ACP: Governmental Affairs and Public Policy - Senate Urged to Avert the 4.4% Medicare Cut Scheduled for 2006 Resulting from the Flawed SGR Formula

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Senate Urged to Avert the 4.4% Medicare Cut Scheduled for 2006 Resulting from the Flawed SGR Formula

October 3, 2005

The Honorable Bill Frist, MD
Majority Leader
United States Senate
S-230 U.S. Capitol
Washington, DC 20510

Dear Dr. Frist:

With the Medicare Trustees projecting cuts of 26% in Medicare's physician fee schedule over a six-year period, we, the undersigned national medical specialty societies and state medical societies, are writing to urgently ask for Congressional action to avert the looming cuts in Medicare physician payments. We appreciate the broad support in Congress to prevent Medicare physician payment cuts and to provide a positive physician update. However, time is running out. Unless Congress acts in the next few weeks, Medicare physician payment rates will be cut by 4.4 percent on January 1, 2006. If this cut is imposed, Medicare rates will fall 16 percent below the government's conservative measure of inflation in medical practice costs (Medicare Economic Index or MEI) from 2002-2006. If this cut occurs, the average physician payment rate will be less in 2006 than it was in 2001.

Physicians need positive payment updates. Even a "freeze" in physician payments would be akin to a payment cut. In 2002, physician payments were cut by 5.4%. Congress acted to avert payment cuts in 2003, 2004, and 2005, replacing steep cuts with increases of 1.6% in 2003 and 1.5% in 2004 and 2005. Although we are very grateful, even with these increases, physician payments fell further behind the MEI: physician practice cost increases over these years were about two times the legislated payment increases.

The American Medical Association (AMA) conducted a survey in February and March 2005 on projected Medicare physician payment cuts. Results indicated that if payment cuts begin in 2006: More than a third (38%) of physicians plan to decrease the number of new Medicare patients they accept; more than half (54%) of physicians plan to defer the purchase of information technology; about a quarter (24%) of physicians plan to close satellite offices; and a third (34%) of physicians whose practice serves a rural patient population will discontinue rural outreach services.

The 2005 Medicare Trustees Report projects physician practice cost inflation for 2006 to be 2.7%. After a severe pay cut in 2002 followed by three consecutive years of updates that were less than practice cost increases, physicians simply cannot absorb any more cuts. A freeze would place physician payments further below the MEI and seriously jeopardize seniors' access to care. Physicians can not absorb a freeze while their practice costs continue to grow.

Other health care providers receive positive updates that reflect their practice cost increases. In 2006, other providers will receive the following positive updates: home health providers +2.5%, hospitals +3.7%; Medicare Advantage plans +4.8%; nursing homes +3.1%. Only physicians are subject to the flawed Sustainable Growth Rate (SGR) formula, which produces negative updates because it is tied to the ups and downs of the national economy, specifically the Gross Domestic Product (GDP) - and not to the health care needs of seniors and disabled patients or the cost of providing care to them.

Lastly, we believe the solution to this problem requires both Congress and the Administration to act. In multiple letters to the Administration, the majority of both the House and Senate have indicated their strong support for regulatory changes, specifically, the exclusion of Part B drug spending from physician service spending.

To preserve Medicare patients' access to care, we strongly urge you to pass legislation and convince the Administration to do its part with regulatory changes.

Sincerely,

American Academy of Child and Adolescent Psychiatry
American Academy of Dermatology Association
American Academy of Family Physicians
American Academy of Neurology
American Academy of Ophthalmology
American Academy of Otolaryngology - Head and Neck Surgery
American Academy of Pain Medicine
American Academy of Pediatrics
American Academy of Physical Medicine and Rehabilitation
American Academy of Sleep Medicine
American Association of Clinical Endocrinologists
American Association of Clinical Urologists
American Association of Hip and Knee Surgeons
American Association of Neurological Surgeons
American Association of Neuromuscular and Electrodiagnostic Medicine
American Association of Orthopaedic Surgeons
American College of Cardiology
American College of Chest Physicians
American College of Gastroenterology
American College of Obstetricians and Gynecologists
American College of Osteopathic Family Physicians
American College of Osteopathic Surgeons
American College of Physicians
American College of Rheumatology
American College of Surgeons
American Gastroenterological Association
American Geriatrics Society
American Medical Association
American Medical Directors Association
American Medical Group Association
American Osteopathic Academy of Orthopedics
American Osteopathic Association
American Psychiatric Association
American Shoulder and Elbow Surgeons
American Society for Clinical Pathology
American Society for Gastrointestinal Endoscopy
American Society for Reproductive Medicine
American Society for Therapeutic Radiology and Oncology
American Society of Addiction Medicine
American Society of Anesthesiologists
American Society of Cataract and Refractive Surgery
American Society of Clinical Oncology
American Society of General Surgeons
American Society of Hematology
American Society of Interventional Pain Physicians
American Society of Nephrology
American Society of Nuclear Cardiology
American Society of Pediatric Nephrology
American Society of Plastic Surgeons
American Thoracic Society
American Urological Association
Arthroscopy Association of North America
Association of American Medical Colleges
Child Neurology Society
College of American Pathologists
Congress of Neurological Surgeons
Heart Rhythm Society
Infectious Diseases Society of America
Joint Council of Allergy, Asthma and Immunology
Medical Group Management Association
National Association of Spine Specialists
National Hispanic Medical Association
National Medical Association
North American Hip Society
Orthopaedic Trauma Association
Pediatric Orthopaedic Society of North America
Renal Physicians Association
Scoliosis Research Society
Society for Cardiovascular Angiography and Interventions
Society for Vascular Surgery
Society of Critical Care Medicine
Society of Hospital Medicine
Society of Interventional Radiology
Society of Thoracic Surgeons
The Endocrine Society
Medical Association of the State of Alabama
Alaska State Medical Association
Arizona Medical Association
Arkansas Medical Society
California Medical Association
Colorado Medical Society
Connecticut State Medical Society
Medical Society of Delaware
Medical Society of the District of Columbia
Florida Medical Association
Medical Association of Georgia
Idaho Medical Association
Illinois State Medical Society
Indiana State Medical Association
Iowa Medical Society
Kansas Medical Society
Kentucky Medical Association
Louisiana State Medical Society
Maine Medical Association
MedChi, the Maryland State Medical Society
Massachusetts Medical Society
Michigan State Medical Society
Minnesota Medical Association
Missouri State Medical Association
Montana Medical Association
Nebraska Medical Association
Nevada State Medical Association
New Hampshire Medical Society
New Mexico Medical Society
Medical Society of the State of New York
North Carolina Medical Society
North Dakota Medical Association
Ohio State Medical Association
Oklahoma State Medical Association
Oregon Medical Association
Pennsylvania Medical Society
Rhode Island Medical Society
South Carolina Medical Association
South Dakota State Medical Association
Tennessee Medical Association
Texas Medical Association
Utah Medical Association
Vermont Medical Society
Medical Society of Virginia
Washington State Medical Association
West Virginia State Medical Association
Wisconsin Medical Society
Wyoming Medical Society