2008 Medicare Cut Projected at 10%

The complex Medicare law requires annual formulaic adjustments to physician reimbursement amounts under Medicare Part B. The Centers for Medicare and Medicaid Services (CMS) described the formula as follows:

The formula compares the actual rate of growth in spending to a target rate, which is based on such factors as the growth in number of Medicare fee-for-service beneficiaries and statutory or regulatory changes in benefits. If the actual rate of growth exceeds the target rate, the update is decreased; if it is less, the update is increased.

The formula has been producing payment reductions. For the past few years, Congress has waived the mandated reduction. The Tax Relief and Health Care Act of 2006 waived the 5.0% reduction that the formula would have required for 2007.

The AMA News is reporting that

Medicare pay to physicians will be reduced about 10% next year if current law remains unchanged, the Congressional Budget Office said Dec. 28, 2006, in its final cost assessment of the legislation that averted a 5% cut this year.

Future Congressional relief from the formulaic reductions may be complicated by the Democrat’s new pay-go policy. As there are many federal annuitants with primary Medicare coverage enrolled in the Federal Employees Health Benefits Program, Medicare payment cuts are picked up by the FEHB Program for those enrollees. This should be interesting.