Support for New Medicare Pay Formula

March 1, 2002

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.

The Medicare Payment Advisory Commission (MedPAC) hasagreed that Medicare’s physician-fee formula needs to be overhauled. Medicarecut physician fees this year by 5.4% because of an "update" in theformula that MedPAC agreed is seriously flawed. 

MedPAC suggested that itsformula revision would lead to an approximately 2.5% pay increase in 2003. Ifthe update formula is not changed, Medicare could again cut physician pay about5%. 

"We are delighted that MedPAC has outlined a Medicare payment formulatied to physicians’ actual practice costs, rather than the gross domesticproduct (GDP), which has no connection to physicians’ actual expenses,"said American Medical Association Chair Timothy Flaherty, MD. "The currentflawed 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 newMedicare patients." 

The Medicare Physician Payment Fairness Act of 2001(H.R. 3351/S. 1707) would impose a fee update formula on Medicare and requireMedicare to reduce the 5.4% cut it imposed starting January 1, 2002. A majorityin both houses support the bill.