Medicare seeks 10% cut in doctor payments: CMS aims to become active purchaser of higher quality services

WASHINGTON, D.C.-As expected, the Centers for Medicare and Medicaid Services (CMS) has proposed a nearly 10% reduction in Medicare physician fees for 2008. The cut reflects the physician payment formula approved by Congress in 1998 that has long been the subject of criticism and debate.

Physicians responded by predicting a drop in service for Medicare patients. The American Medical Assn. (AMA) reports that more than 60% of doctors will accept fewer new Medicare beneficiaries if rates are cut as proposed; more than one-fourth say they will stop seeing seniors altogether.

As part of efforts to develop a more rational payment system for doctors, CMS also is proposing a number of quality-care measurement programs that will boost payments for higher-value treatments and services. Instead of merely "paying for procedures," CMS aims to become an "active purchaser of higher-quality services," commented Acting CMS Administrator Leslie Norwalk in announcing the new proposal.

"With many managed care plans linking their fee schedules to Medicare payments, if these cuts go through in 2008, there is a significant possibility that physicians will opt out of plan networks," says MANAGED HEALTHCARE EXECUTIVE Editorial Advisor Joel V. Brill, MD, chief medical officer of Predictive Health, LLC in Phoenix.

"Plans should not be surprised if physicians attempt to renegotiate now and lock in multi-year rates based on 2007 schedules," Dr. Brill continues. "If Congress makes part of the fix dependent on physicians reporting on Physician Quality Reporting Initiative measures, plans will need to address how this will fit with their provider fee schedules and quality incentive programs."

>> PROPOSAL

As part of efforts to develop a more rational payment system for doctors, CMS also is proposing a number of quality-care measurement programs that will boost payments for higher-value treatments and services.