Congress Halts Cuts in Medicare Fees

Following a long and hard fought battle, the U.S. Congress enacted legislation to prevent the 4.4 percent reduction in Medicare physician fees that would have been implemented on March 1. If Congress had not acted, this cut would have been in addition to last year’s 5.4 percent reduction in Medicare fees.

As a result of Congress’ action, the Centers for Medicare and Medicaid Services (CMS) was authorized to correct various errors in its previous estimates of physician spending, and the conversion factor for all physician services for 2003 has been increased by 1.6 percent. This legislative change means that over the next 10 years an additional $54 billion will be “put back” into physician payments. When coupled with $15 billion already returned to physicians when CMS made certain changes to the formula for calculating the annual Medicare conversion factor, this translates into $69 billion from 2003 to 2012. This is real money.

The Medicare Payment Updates chart depicts what would have happened (“baseline”) had Congress not acted, versus what should happen in the future now that CMS has corrected its mistakes (“fix errors”).

What this means for neurosurgery: Doing “back of the envelope” calculations (which are not entirely accurate and representative of what will be paid to each neurosurgeon) we have about 1 percent of this “pot” which equals about $690 million total for neurosurgery over this 10-year period. This further translates into $69 million each year, or about $19,000 per neurosurgeon, per year (assuming 3,600 neurosurgeons). Considering that private payers often tie their reimbursement rates to the Medicare rate, the positive financial effects should be even greater.

The 2003 Medicare fee schedule does include some additional changes in the practice expense relative value units for neurosurgery (and some other technical changes), which resulted in an overall 1 percent reduction in neurosurgical fees (note that some procedures were cut more than others because of these additional changes). Thus, the net effect for neurosurgery is an overall increase in reimbursement from 2002 to 2003 of 1 percent. The National Medicare Payment chart shows the Medicare payment rates for key neurosurgical services over time.

While the changes in the per service reimbursement rates may seem small, one must keep in mind that the money put back into the system is spread out over a 10-year period and helps alleviate the 16 percent to 19 percent cut that neurosurgeons would have seen had Congress not acted. Thus, in typical Washington fashion, we are not really seeing increases, but rather preventing further decreases-on balance, this is certainly better than nothing!

All is not won yet, however. Congress’ action did nothing to fix the underlying problems with the formula for calculating Medicare payments, which is still tied to gross domestic product. With the dismal economic forecasts, further reductions may be likely. We will be working this year to try to achieve changes in the formula to help address this situation.

Katie O. Orrico, JD, is director of the AANS/CNS Washington Office.