JCN: The Medicare bill is a culmination of six or seven years of work between Republicans and Democrats in the Congress as well as many special interest groups. The AMA was seeking a chance for our seniors to have a choice: to make sure they’re covered and that they have doctors available to them when they are needed. Prior to the passage of the bill, the American Academy of Family Physicians told us that 24 percent of their doctors around the country did not feel they could see new Medicare patients. That had to do with a mountain of administrative hassles and, because reimbursements were going down at a time when liability premiums and overhead costs were going up, many physicians felt they were losing money and in some cases actually documented that it cost them more to see a patient than they were being paid. So, access was a real issue for us. Secondly, we’re quite aware that America is based on the principle of choice, so the opportunity to have at least one other choice than traditional Medicare is a step forward.

JCN: If one looked carefully all the facets for which Medicare pays, every single one was slated to go up: durable medical equipment, hospital costs and so on. Only one was slated to go down: physician reimbursement. That has to do with a system called the SGR - sustainable growth rate – which has to do with, among other things, the gross domestic product and with the number of people who are enrolled in the Medicare+Choice program. Initially, those numbers were under-estimated. All this led to the very basic fact that the numerator got smaller and the denominator got bigger, leading to a negative update or a reduction in payment to physicians. This was already after they took about a four percent cut a year ago. Remember too, that all other insurers use Medicare payment as a basis for their payment rate, therefore, if Medicare goes down, so too do the others. The good news is that, instead of the projected four and a half percent decrease which was initially proposed, there’ll be a one and a half percent increase for each of the next two years. We were seeking to make the update stay with the Medical Economic Index. Now, one and a half percent is not even close to the cost of living increase and barely makes physicians able to stay whole, and it really is a concern. This is not about whether a doctor is getting a new automobile or buying a new larger home, this is about whether a physician can actually keep his or her office open. That is not understating the case even a little bit. Access to care really was a major concern to us. We have a two year "fix" on this problem, but during those two years there will be some legitimate and substantial negotiation to come up with an equitable and fair, fact-based way to make sure that physician payment keeps pace at least with inflation.

JCN: The issue of making law on Capitol Hill is the art of compromise. We asked for what we thought was legitimate, realizing we would probably get less, and got far less than we had hoped for, but nonetheless we feel good. We would like to have had more choices beyond traditional Medicare than just an HMO. We think that something more like the Federal Employees Health Benefit Plan, which has multiple choices for Americans, makes a lot more sense and also introduces competition and allows our seniors to have better access to an array of choices. We think the administrative hassles are a nightmare and could be reduced dramatically even beyond that which this bill does. We think that paying physicians at least at the rate of inflation makes sense. It does not make sense to the American Medical Association that, when the number of seniors is growing rapidly, the length of their lives is increasing, the number of diseases which are now known exceeds that which is was known when I was in medical school, technology has increased beyond our wildest dreams – medical care should cost more and the federal government wants to pay less. Medicare reimbursement has not kept up with inflation and, when you add to that the tremendous costs of medical liability insurance and overhead increases, it’s not a great time to be a physician.

The bill’s prescription benefit is a great start, but it is not finished. The benefit of these pharmaceuticals is tremendous but so too are their costs. There was not a provision of the bill to offer any ability to negotiate with pharmaceutical companies, and it would appear that whatever they charge will be paid at the percentage that the bill allows, and that needs to be dealt with. It would seem to us and many others that, if pharmaceuticals are going to be paid for, there will have to be some way in which prices could be reduced in some fashion to our seniors - whether with a formulary, being able to negotiate or finding new ways to pay for it.

JCN: I’m sure that most physicians wanted to continue seeing the patients already in their care and I think many would have, irrespective of what had happened with the update. The hope now is that the trend which was reported by the American Academy of Family Physicians would be able to be reversed and more physicians will be willing to see new Medicare patients as this part of our population grows and needs care. But in states like Pennsylvania, like Nevada, like Mississippi, like Florida – where there is an exodus of physicians – we are concerned about the access of care by this very vulnerable population.

JCN: Hopefully there’s going to be more due process – when there are audits the government is not going to have the heavy hand it once had. In the past, they would immediately penalize a physician, with interest, for an erroneous claim. Now there’s no penalty or interest until the claim is adjudicated, which is certainly a much fairer process. The American Medical Association wants physicians to follow the law. On the other hand, it’s inappropriate for the government to be heavy-handed as has been the case in many circumstances. They’ll come in and look at two, three, five or ten charts, find an error, and extrapolate to all the records you have and say, "Okay, you made a mistake here for $100. You have 5,000 patients. This is how much money you owe." That’s crazy. That makes no sense. That might be the only error you’ve ever made, so we think that needs to be straightened out. The new law reduces the amount of extrapolation. Also, if you made a mistake in the past, you were de facto guilty. Now, if you make a mistake you’ll have an opportunity to resubmit the corrected claim without any penalty: no harm, no foul.

JCN: There’s another part of the bill, besides the 1.5 percent update, that shows how technically interesting this gets. Physician who do procedures in, say, California, New Mexico, Iowa and New York, are not paid the same for the same procedure even it’s billed correctly and the claim is clean. The reasons for that are quite interesting going back to historic way in which Medicare was originally paid for, which was on the usual, prevailing and customary fees at the time of 1965. That disadvantaged my home state of Utah dramatically because physicians there charged magnitudes less than physicians in other states. That was frozen when Medicare came in, only to be updated slightly, so the physicians in some states still lagged dramatically behind others. That has been attempted to be dealt with by a thing called the geographic practice cost index, or the GPCI, which attempted to pay physicians in the disadvantaged states – mostly the fly-over states – slightly more by taking monies from the states that were paid more. That didn’t seem to be fair to those physicians any more than it was fair to those already underpaid. This bill does put $700 million into the GPCI fund to help slightly level out that playing field and make it a little easier for the doctors in the heartland of the country to be able to see patients and not be disadvantaged as much as they once were. That’s a terribly significant change and one that has not been dealt with before. This is new money being placed in as opposed to money being just moved around from one shell to another.

JCN: Physicians in rural areas receive a double Medicare penalty from the Sustained Growth Rate and secondly from geographical adjustments based on where a physician practices. To mitigate these geographic variations, eligible physicians will have payments increased in 2004, 2005 and 2006 by a total of $1 billion as a result of adjustments to the work component of the Medicare fee schedule. An additional $700 million will be available for bonus payments to recruit and retain physicians serving in underserved areas. In Pennsylvania, these provisions will ease geographic payment variations by adding an estimated $38 million to the fees of eligible physicians.

JCN: Yes. The one specialty that seems to be not as whole as it could be is our Oncology colleagues, who treat patients in their offices by administering very expensive anti-tumor drugs that they purchase in advance themselves. The new bill still does not pay oncologists for the full cost of the drugs. As I understand it, the new bill reimburses for the average sales price plus six percent - unless the Inspector General finds that this exceeds the true market cost. So, it’s a shell game. It’s more favorable than the original bill which used as a baseline the average wholesale price, which is some mythical figure. The bottom line is that physicians still have to pay for the drugs more than they’re reimbursed. And that can’t go on.

JCN: The new law requires the Institute of Medicine (IOM) to evaluate leading health care performance measures and options to implement policies that align performance with payment under Medicare. No later than 18 months after enactment of Act, the IOM will submit a report to the HHS Secretary and Congress describing the findings of such evaluation and recommendations for an overall strategy and approach for aligning payment with performance, including options for updating performance measures. The AMA has already convened a group to take the lead in creating clinical performance measures that are derived from evidence-based clinical guidelines. Composed of more than 60 state and specialty medical societies, the Physician Consortium for Performance Improvement has developed several physician performance measurement sets and related documents to guide their implementation. The AMA believes the work of The Consortium will prove vital in ensuring that any quality improvement program is meaningful and relevant to clinical care.

JCN: Under the new Medicare law, the HHS Secretary is authorized to make grants to physicians to assist them in implementing electronic prescription programs beginning in 2007. The AMA is pleased with the final Medicare ruling making e-prescribing voluntary. Grant funds may be used for purchasing, leasing and installing hardware and software, including handheld computer technologies; making upgrades and other improvements; and providing education and training to eligible physician staff on the use of technology. In awarding the grants, the Secretary is to give special consideration to physicians who serve a disproportionate number of Medicare patients, and preference to physicians who serve a rural or underserved area. Grant applicants must agree to pay half the costs of implementation. Fifty million dollars in grants is authorized for FY 2007, and an undetermined amount for 2008 and 2009. The grant program then expires, unless extended by Congress.