Chances for a Congressional “fix” to the impending 10.1% pay cut in the Medicare Physician Fee Schedule for 2008, which we reported earlier this week, are now looking dim partially due to a threatened veto.  The Senate Finance Committee had been working on a bill that would have eliminated the 10.1% Medicare pay cut for all physicians by obtaining the funds necessary to “pay for” the fee freeze through reductions in Federal payments to Medicare Advantage health plans.  Medicare Advantage plans are private Medicare plans run by commercial insurance companies, which receive Federal funds to subsidize their operations.  These Federal funds to the Medicare Advantage plans are felt by many to be too large- thus making a reduction in this funding the mechanism which would permit a “freeze” on Medicare Physician Fees for 2008 and avoiding the 10.1% pay cut.

In a letter to Senate Finance Committee Chair Max Baucus (D-Montana) and ranking Republican, Sen. Charles Grassley (Iowa), HHS Secretary Michael O. Leavitt sent the Senators several Presidential veto threats as well as Administration demands in regard to any “physician fee fix” to the impending pay cuts.  Secretary Leavitt stated that the President’s advisers would recommend a veto of any bill that “results in a loss of access to health care services, benefits, or choices in the Medicare Advantage program”.  The reductions in Federal support of the Medicare Advantage plans envisioned in the Senate Finance Committee bill would certainly result in some reductions in benefits available under Medicare Advantage plans.

Additionally, the Secretary’s letter threatens a veto if the Senate Finance bill “raises taxes…. to fund spending increases,” or alters the Medicare “Part D” drug benefit program.  Among the many Administration demands of any “fee schedule pay fix” is the requirement that a Congressional bill “Pay for any adjustment to the physician fee schedule formula by responsibly adjusting payments to other providers (hospitals, home health, home oxygen, etc.) in the fee-for-service Medicare program.  The Secretary also expected any Senate bill to “Condition receipt of a portion of any fee adjustment to adoption of “certified electronic health information technology.” ”Physicians who do not adopt appropriate, available technology should receive a lower payment than those who do.”

As a result of the Secretary’s letter, which effectively “guts” the Senate Finance bill of the financing mechanisms needed to “pay for” the Medicare Physician Fee “freeze” for 2008, further Congressional efforts to develop a bill to “fix” the physician pay cuts have been put off for an indefinite time.  Political experts now put the chances for avoiding the physician pay cuts at “50-50” or even lower.  The adverse effect of a Medicare Physician Fee Schedule pay cut of 12% (the decrease in the Medicare Physician Fee schedule will actually be 12% for emergency physicians, reflecting a 2% additional pay cut attributable to emergency physicians having lesser “practice expenses” than office based physicians) will be further magnified by physician contracts with commercial insurance companies which are based on a percentage of the current Medicare Fee Schedule.

The recommendation of EDPMA counsel Joyce Cowan is that physicians not contact their Federal Legislators in the immediate future as they are all aware of physician’s positions on this topic. They should instead try to attend any town meetings or meet with their representatives when they return home for Christmas recess. It is her opinion that any potential “fix” will probably not happen until early next year.     

Secretary Leavitt’s letter to Senators Baucus and Grassley is reproduced below.    

Secretary Leavitt Letter to Congress on Medicare Physician Payment Legislation 

December 4, 2007 

The Honorable Max Baucus
United States Senate
Washington, D. C. 20510 

Dear Senator Baucus: 

We understand the Senate Finance Committee soon intends to consider draft legislation to block the upcoming statutorily mandated reduction in payments to physicians under the fee-for-service Medicare program. As you know, this 10 percent cut would otherwise occur on January 1, 2008. I write to reiterate the Administration's commitment to strengthen and improve Medicare, and to ensure our Nation's seniors continue to have access to, and choices among, high-quality benefits through this important program. 

The Administration looks forward to working with Congress on appropriately offsetting legislation to mitigate the cut to physician reimbursement rates under Medicare. To that end, we ask that Congress adhere to the following principles for an update to the physician fee schedule.

 Such a bill should:

• Pay for any adjustment to the physician fee schedule formula by responsibly adjusting payments to other providers in the fee-for-service Medicare program.
• Bear in mind the impact on beneficiary premiums of potential increases in Part B spending for physicians, when considering appropriate offsets.
• Condition receipt of a portion of any fee adjustment to adoption of certified electronic health information technology. Physicians who do not adopt appropriate, available technology should receive a lower payment than those who do.
• Implement payment policies to ensure patients receive high-quality care in the most medically appropriate and efficient setting without increasing costs for taxpayers or for Medicare and its beneficiaries.

Conversely, the President's senior advisors would recommend a veto of any bill that:

• Raises taxes on the American people to fund spending increases.
• Results in the loss of access to health care services, benefits, or choices in the Medicare Advantage program, through which nearly 20 percent of seniors and Medicare beneficiaries with disabilities currently receive their benefits.
• Disturbs, undermines, or overturns the many successes of the new Medicare prescription drug benefit.
• Undermines efforts to promote fiscal solvency in the Medicare and Medicaid programs. For example, legislation should not repeal the Medicare funding warning or erode the programs' fiscal integrity by overturning regulatory policies developed by the Administration.

We look forward to working with you to produce legislation that the President can sign into law. The Office of Management and Budget advises that from the standpoint of the Administration's program, there is no objection to the transmittal of this letter. 

Sincerely,
/s/
Michael O. Leavitt 

Identical letter sent to the The Honorable Charles Grassley