Medicare fee increase turns out to be reduction for many primary care codes

When is a 0.5-percent increase actually a cut? Once it’s run through the flawed Medicare payment formula. Trailblazer Health Enterprises, the company contracted to administer Medicare in Texas, posted the updated Medicare physician fee schedule on the Internet in early January. Access it at www.trailblazerhealth.com.

After failing to get a fix for the SGR, then desperately fighting against the proposed 10.1-percent cut in Medicare fees only to get a 0.5-percent raise through June 30, 2008, physicians are likely to be irate when they discover they’re receiving less payment for most primary care codes now than they were in 2007.

For example, consider the payment for a level-three office visit for a new patient in Harris County. In 2007, the doctor would get $94.45 but in 2008, she would only get $92.85. How about a level-four office visit for an established patient in Brazoria County? In 2007, CMS paid $90.22 and in 2008, $88.92. In fact, of the 10 office visit E&M codes across all eight geographic divisions of the state recognized by CMS, 77.5 percent of the codes will be paid at a lower rate in 2008 than they were in 2007.

Where did the 0.5-percent increase go? It was swallowed by an increase in another part of the Medicare payment formula, the budget neutrality work adjustor. The 0.5-percent increase Congress passed at the end of December was applied to the conversion factor used in the formula to convert the total RVUs for a specific code into dollars and cents. The value of a single adjusted RVU went from $37.8975 to $38.0870.

Medicare law forbids changes to the work RVUs to increase overall spending on physician services by more than $20 million each year. To accommodate this “budget neutrality” mandate, CMS applies a budget neutrality adjustor to the work RVU portion of the formula. In 2008, that adjustor increased from -10.06 percent to -11.94 percent. Reductions to certain geographic adjustors in the formula also caused overall payments to drop in many locations across the state.

These rates are only valid through June 30, 2008, when the current delay expires. Unless Congress acts before that deadline, CMS will implement the 10.1-percent cut to the conversion factor on July 1.

“We must hold Congress accountable on their commitment to provide physicians a positive Medicare payment update,” TAFP CEO Tom Banning says. “We will redouble our efforts this spring to fix the flawed Medicare SGR. I urge you to contact your legislators and let them know the effect this change has had on your practice.”