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Medicare Cuts Physician Payments 28.1% Through 2005

February 28, 2002

Increases in Costs of Providing Care Higher Than Reimbursements

(Washington, DC): Medicare beneficiaries' access to care will decline as Medicare reduces payments to physicians by at least 28.1% between 2002 and 2005 (see chart) according to a statement today by the American College of Physicians -American Society of Internal Medicine (ACP-ASIM) to the House of Representatives, Committee on Ways and Means, Subcommittee on Health.

"Addressing the inadequacies of physician payments by Medicare is critical to ensure that beneficiaries continue to have access to quality care," said William Hall, MD, president of the ACP-ASIM. "For four consecutive years, Medicare payments are expected to suffer deep cuts because of Medicare's flawed updated formula. The result will be a total decrease of at least 28 percent in inflation-adjusted payments, which will make it difficult to continue to deliver care to Medicare patients."

Medicare rates for physician services have been reduced in four of the previous ten years, falling 5.4 percent in 2002. Flaws in the method used by Medicare to determine annual changes in the physician fee schedule have caused the Center for Medicare and Medicaid Services to project an 18.3 percent decline in reimbursements for physician services between 2002 and 2005.

"The obvious hardship these cuts impose on physicians and their patients was recognized by a super-majority of members of Congress who supported a move to reduce this years' 5.4 percent cut," said Dr. Hall. "Unfortunately, Congress failed to act last year and we face several additional years of severe cuts unless they act now."

"There is a point where the economics of running a practice will force physicians to institute changes to limit the damage from continued Medicare payment cuts, " said Dr. Hall. "Like any small business, revenue must exceed the costs of providing services in order for a medical practice to remain financially viable."

Physicians have limited options to offset the losses from declining Medicare payments and rising costs: reducing the percentage of Medicare patients in their practice, eliminating beneficial services and technology, discontinue providing charitable care, or closing their practices entirely.

The percentage of primary care physicians accepting all new Medicare patients declined steadily over the 1997-2001 period. This trend is likely to continue and will hit the hardest in rural and other areas that are already underserved. As the number of Medicare patients increases from 34 million today, to 40 million in 2010, to 60 million in 2030 patients will find fewer and fewer physicians who are able and willing to provide care to Medicare patients.

ACP-ASIM is the nation's largest medical specialty organization and the second largest physician group. Membership encompasses more than 115,000 internal medicine physicians and medical students. Internists are the major providers of medical care to adults in America.

Jack Pope, ACP-ASIM Washington Office, (202) 261-4556
Jennifer Whalen, ACP-ASIM Washington Office, (202) 261-4575

Page updated: 11-04-03

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