It will cost billions of dollars to override required cuts in Medicare payments to doctors, but the perennial stopgap move is necessary to ensure that patients receive the health care they need, lawmakers said Tuesday.

A program set up in 1997 to put the brakes on federal Medicare spending sets annual and cumulative spending targets for physician reimbursements. When spending increases exceed economic growth, payments to doctors are supposed to be cut.

Under the system, payments to doctors would have to be cut by 5% a year through 2016 to meet program spending targets, according to federal estimates.
That is unlikely to happen. Lawmakers fear that any reduction in payments could add to the record increases in Medicare premiums and drive doctors from the program.

Rep. Michael Ferguson, R-N.J., said the mandated cuts system is "fatally flawed and it's time we start writing its obituary today."
Medicare doctor fees rose 4.5% between 2000 and 2005.
During the same period, spending per patient for physician services increased 45% as beneficiaries went to the doctor more often and received more complicated and expensive services.

If left unchecked, those increases would compromise the future of Medicare, said A. Bruce Steinwald, director of health care for the GAO.
This year, doctor fees account for 16% of Medicare spending on benefits, or $60 billion. Since 1997, the government has overshot spending on those fees by a cumulative $30 billion.

Even though the law requires reductions in doctor payments when the target is missed, Congress has been reluctant to allow those cuts to go through. The last cut in doctors' fees — 4.8% — was in 2002.

Since then, Congress has rejected the mandated reductions and allowed small increases in payments. The same is likely to happen this year.
"I don't believe we can continue this Band-Aid approach to fixing this recurring physician payment problem," said Rep. Joe Barton, R-Texas, chairman of the House Energy and Commerce Committee.

Speaking at a hearing of the panel's health subcommittee, he pressed his colleagues to come up with a permanent fix before the end of the current session.

Rep. Frank Pallone, D-N.J., said the groundwork already had been laid for a temporary fix, given the limited number of legislative days left in the year.
Even a 1% increase next year would cost the government $13 billion through 2011, the Congressional Budget Office estimates.

Lawmakers appeared to chafe Tuesday at the system under which the mandated cuts are calculated.
Rep. Anna Eshoo, D-Calif., suggested fees be linked to the Medicare economic index, as has been done in the past. Now it is tied to increases in the gross domestic product.

However, allowing doctor payments to rise in step with medical inflation would increase federal spending on payments by $218 billion by 2016, the Congressional Budget Office estimates.

Other lawmakers would like to create a program that reimburses doctors on a pay-for-performance basis, with increases linked to quality and efficiency goals. But such a program wouldn't necessary rein in the volume of services sought by Medicare patients unless coupled with other restraints, Stuart Gutterman, of the Commonwealth Fund's program on Medicare's future, told the subcommittee.

Medicare spending is now about 3% of GDP. As the baby boomer generations ages, the increased number of beneficiaries alone would increase spending to 5% of GDP by 2030, the Congressional Budget Office estimates. And if those boomers continue to seek more services — and more expensive ones — Medicare spending could leap to 7% or more of GDP by 2030.