Medicare physician fee cut may really happen in 2006

For the past four years, Medicare has proposed cuts in the fee schedule for physicians. And for the past three years, the AMA has prevailed upon Congress to turn those cuts into 1.5%increases. However, this time the proposed 4.3% cut may stick. The last time it happened this way was 2002, when reimbursement rates were cut by 5.4%.Why the tough news for doctors now?

• Utilization has been increasing, so total payments to doctors (reimbursement rate x volume) are rising much faster than the fee schedule
• The overall budget is under pressure (think Iraq and tax cuts)
• Reversing the decrease will cause pain elsewhere: by making Medicaid cuts deeper, or making the premium increase for Medicare recipients even higher
• As I've written before, the Medicare Drug Benefit is going to start squeezing out other benefits over time --although there won't be much affect next year

The one year cut isn't a big deal. The real question is whether in the coming years we'll see fees brought back to the baseline as happened after the last cut, or whether it's the start of a downward ratchet.