The Medicare Payment Advisory Commission (MedPAC) has
agreed that Medicare’s physician-fee formula needs to be overhauled. Medicare
cut physician fees this year by 5.4% because of an "update" in the
formula that MedPAC agreed is seriously flawed.
MedPAC suggested that its
formula revision would lead to an approximately 2.5% pay increase in 2003. If
the update formula is not changed, Medicare could again cut physician pay about
"We are delighted that MedPAC has outlined a Medicare payment formula
tied to physicians’ actual practice costs, rather than the gross domestic
product (GDP), which has no connection to physicians’ actual expenses,"
said American Medical Association Chair Timothy Flaherty, MD. "The current
flawed Medicare payment formula has created a deep Medicare payment cut in 2002,
which threatens access to medical care for our nation’s seniors. As a result,
physicians may be forced to lay off staff and may be unable to accept new
The Medicare Physician Payment Fairness Act of 2001
(H.R. 3351/S. 1707) would impose a fee update formula on Medicare and require
Medicare to reduce the 5.4% cut it imposed starting January 1, 2002. A majority
in both houses support the bill.