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Lower Medicare Payouts Concern Bush Officials

By Robert Pear

NY Times, October 25, 2002

Bush administration officials say they have become deeply concerned that a cut in Medicare payments to doctors, to be announced next week, will prompt many doctors to limit their participation in the program, reducing access to health care for the elderly.

Medicare payments to doctors were cut 5.4 percent in January, and Medicare officials said that next week they expected to announce a further cut of 4.4 percent, effective on Jan. 1.

Asked to describe the likely effects, Thomas A. Scully, administrator of the Medicare program, said: "You'll have mad doctors. There will be access problems, and seniors will feel it."

The cuts result from a formula specified in the Medicare law. The Bush administration says it has no discretion to halt the cuts, a contention disputed by doctors and by some influential lawmakers.

In March, doctors in a dozen states said, in interviews with The New York Times, that they were refusing to take new Medicare patients because Medicare was paying them too little to cover their costs. A second cut will accelerate the trend, doctors said this week.

Many private insurers link their payments to the Medicare fee schedule, compounding the effects of any cut in Medicare reimbursement.

Tommy G. Thompson, the secretary of health and human services, said this week that he and Mr. Scully were "very concerned" about the impending cut.

Administration officials said President Bush's chief of staff, Andrew H. Card Jr., and his senior political adviser, Karl Rove, had taken an interest in the cut, in part because the administration did not want to alienate doctors or the elderly two weeks before Election Day. Democratic candidates are always hunting for evidence to back their argument that Republicans want to cut Medicare.

Dr. Harold M. Sokol, 46, a lung specialist in Albany, said: "My rent, my malpractice insurance premiums, my nurses' wages — indeed, all our expenses — have gone up, but Medicare payments are going down. How can we make ends meet? Who will want to do this job? It will be harder for Medicare patients to find physicians willing to treat them."

Doctors fault Congress and the administration. The cuts stem from a formula adopted by Congress in 1997. In his budget request in February, Mr. Bush assumed that the cuts would take effect and did not try to halt them. Congress has considered several bills to increase doctors' fees, but it adjourned last week without passing any of the legislation. Chances for action in a lame-duck session are uncertain.

Proposals to aid doctors have bogged down for three reasons:

¶Consumer advocates and some lawmakers insist that before Congress increases Medicare payments to doctors, it must help Medicare beneficiaries struggling with the high costs of prescription drugs. Congress cannot agree on how to provide drug benefits.

¶Hospitals, nursing homes and health maintenance organizations say they too face severe financial problems and should get higher Medicare payments if Congress increases payments to doctors. That would significantly raise the cost of any legislation.

¶A dispute is raging over whether the Bush administration can unilaterally postpone the cuts in payments to doctors, without action by Congress.

Since March, Representative Bill Thomas, the California Republican who is chairman of the Ways and Means Committee, has repeatedly urged Mr. Scully to increase payments to doctors, to correct "technical errors" in the payment formula. Some White House officials have made similar suggestions.

But Secretary Thompson said, "We don't have the statutory authority" to avoid the cut planned for next year.

In an interview this week, Mr. Scully said: "Medicare's physician fee schedule has a glitch in it. It's clearly broken, and it needs to be fixed. We've scoured the earth to find a lawyer who says we have the authority to fix it administratively, but the lawyers cannot find a way. This question has been examined at the highest levels of the Justice Department and the White House counsel's office."

Robert B. Doherty, senior vice president of the American College of Physicians, which represents doctors specializing in internal medicine, said: "We're heading toward a collapse. If Congress does not establish a predictable, reliable method to update Medicare payments to keep pace with inflation, there won't be enough doctors willing to accept large numbers of Medicare patients."

In the last two years, health care providers have spent tens of millions of dollars lobbying Congress to increase their Medicare payments. Lawmakers say doctors and home care agencies appear to have the strongest case because Congress has actually cut their payments, not just slowed the rate of growth.

Medicare uses a fee schedule to pay doctors. The fee schedule specifies payments for more than 7,000 services ranging from routine office visits to complex surgical procedures. Payments are updated each year, using a formula that allows total spending to rise with Medicare enrollment and economic growth, among other factors.

Doctors say they have been shortchanged for several years because the government underestimated economic growth in the late 1990's and the number of people who would be in Medicare's fee-for-service program. As H.M.O.'s withdrew from Medicare, people returned to the original fee-for-service program, increasing enrollment more than expected.

In effect, said Representative Nancy L. Johnson, Republican of Connecticut, the calculations of the annual Medicare update left out the cost of caring for one million people.

Medicare officials say that if they acknowledged and corrected these mistakes, by increasing payments to doctors in 2003, they could expose the government to lawsuits demanding back pay for errors in previous years.

But doctors note that the Medicare law says "there shall be no administrative or judicial review" of factors used to compute their payments.

AARP, the lobby for the elderly, said Congress should not increase Medicare payments to health care providers unless it authorizes drug coverage for beneficiaries. But the organization also told Congress, "Errors or miscalculations in Medicare payment formulas should be corrected."

In June, the House passed a bill to provide prescription drug benefits to the elderly. The bill would increase Medicare payments to most health care providers, including doctors, who would receive an increase of about 2 percent in each of the next three years. The Senate has taken no action on the bill.

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