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Gaining Payment Parity For Anesthesia Services Under Medicare

ASA is pleased that at the end of 2007, the Centers for Medicare & Medicaid Services (CMS) recognized the gross underpayment for anesthesia service and accepted a 32 percent increase to anesthesia work values. This amounted to a 25 percent overall increase, bringing the Medicare anesthesia conversion factor to a national average of $19.97. The increase was the direct result of ASA’s considerable multi-year effort to work through the RUC and rule-making process toward a meaningful update.

Considering anesthesiology’s long campaign to counter Medicare underpayment, this increase is a significant step forward. In 1990 and 1991, the average anesthesia conversion factor was $19.30. When the Medicare Fee Schedule went into effect in 1992, the anesthesia conversion factor plummeted to $13.94. According to the Department of Labor, if the 1990 and 1992 conversion factors had merely kept up with the general inflation rate, in 2007 they would be $29.77 and $20.03, respectively.

Even with the newly-instated increase, the Medicare anesthesia conversion factor is significantly less than what is paid on average by private insurers. Meanwhile, for most other medical specialties, Medicare pays an average of 80% of what is paid by private insuers.

To this end, the Government Accountability Office (GAO) released a report in 2007 confirming the payment disparity between Medicare and commercial payments for anesthesia services. The GAO concluded that Medicare anesthesia payments were 67 percent lower than average commercial payments when the report was released. The 2008 Medicare rate remains far lower (>60%) than commercial fees. Further, the GAO study found that the number of anesthesiologists decreased as the concentration of Medicare beneficiaries increased in 87 Medicare payment localities.

The GAO study was requested in late 2005 by Representative Pete Stark (D-CA), now chair of the Ways and Means Health Subcommittee, and by former Representative Nancy Johnson (R-CT), his predecessor as chair. Reps. Stark and Johnson expressed concern that the difference between Medicare and private anesthesia payments could create regional discrepancies in the supply of anesthesiologists and asked GAO to explore the issue.

For further information, please contact Ronald Szabat, ASA Executive Vice President & General Counsel at (202) 289-2222.

March 2009