CMS proposes lessening 2003 physician payment reduction - Updata - Centers for Medicare and Medicaid Services - Brief Article - Statistical Data Included

Healthcare Financial Management, August, 2002

The Centers for Medicare and Medicaid Services (CMS) has proposed a change to the 2003 physician fee schedule update that would result in a physician payment reduction of only 4.4 percent in 2003, instead of the 5.1 percent reduction anticipated under current Medicare law. The decrease in payment rates would occur despite a slight increase in the estimated total amount paid out. The change was deemed necessary due to concern that the originally scheduled physician payment rate reduction failed to account adequately for physicians' actual costs.

In a proposed rule published in the June 28, 2002, Federal Register, CMS explains that change in the estimated 2003 payment rate would result from a proposed change in the formula required by Medicare law to determine the 2003 physician payment rate reduction. CMS recommends changing the method used to calculate the Medicare Economic Index (MEI), which measures medical inflation in providing physician services. The proposed changes to the MEI would increase the 2003 update from. 2.3 percent to 3.0 percent. CMS expects to refigure its estimates in the coming months.

CMS also published an accompanying interim final rule that will make it easier to take into account the physician practice expense information in setting the 2003 payment rates. Improved collection of practice expense information provides more accurate data to be plugged into the rate-setting formula. CMS's technical changes, such as to the MEI and practice expense process, would ease--but cannot prevent--payment reductions under the current Congressionally mandated formula for rate setting.

In any case, the proposed rule also would expand coverage for telehealth services to include psychiatric diagnostic services. Further, the proposed rule would establish a process for adding and deleting services from the list of covered telehealth services. According to the proposal, CMS would consider requests for additions to the list on an ongoing basis. Requests to add services to the next year's physician fee schedule would be considered as long as they are submitted by December 31 of the previous year.

Notably, CMS also would about double the roughly $4.00 Medicare payment for administering vaccine immunizations. Comments on the proposed and interim final rules are due August 27, 2003. The final physician fee schedule will be effective January 1, 2003.