Congress and President Bush Agree to Small Medicare Increase for Half of 2008, Averting Huge Cuts — the Battle for SGR and Other Reforms Continues

Ronald Szabat, J.D., LL.M.
Executive Vice President – External Affairs and General Counsel


nder legislation signed into law at year’s end, new payment rules are now in effect under the Medicare Physician Fee Schedule. One such change in the so-called “Medicare, Medicaid and SCHIP Extension Act of 2007” provides for a 0.5-percent increase to the physician fee schedule conversion factor for dates of service beginning January 1 through June 30, 2008. For anesthesiology, this takes the national average Medicare anesthesia conversion factor to roughly $20 per unit, reflective, again, of the significant increase obtained by ASA as a result of its econometric model that showed substantial undervaluation of the anesthesia work values through the Medicare five-year review process.

This overall Medicare development came after months of wrangling between House and Senate Democrats and Republicans over funding for an appropriate update increase for 2008. Despite a constant push by key committee Democrats and some Republican allies through much of last year, these efforts were dealt a serious setback late last session when Health and Human Services Secretary Michael O. Leavitt drew a line in the sand that essentially ended all negotiation for 2007 between the White House and the Democratic majority in Congress. Now, Congress must go at it again to avert deep cuts in Medicare payment of more than 10 percent on July 1, 2008. Absent further action by Congress and President Bush early this year, these previously scheduled cuts will go into effect mid-year.

Looking back, it is hard to reconcile the remarks of Secretary Leavitt in identical letters to Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA) with the nation’s enduring commitment to the Medicare program. Late into 2007, both Sen. Baucus and Sen. Grassley had been working very hard, in good faith, on a bipartisan basis to try to arrive at a package of Medicare update increases, sensible State Children’s Health Insurance Program (SCHIP) reauthorization and other reforms for further negotiation with the House and, of course, ultimately the White House.

Yet, in his end-of-session letters to Sen. Baucus and Sen. Grassley, Secretary Leavitt stated emphatically that any bill to avert the 10-percent payment cuts for all Medicare physicians “should pay for any adjustment to the physician fee schedule formula by responsibly adjusting payments to other providers in the fee-for-service Medicare program.” Taken literally, these statements seemed to advocate that Medicare Part B payments should be frozen in a fixed pool for all physicians and beneficiaries irrespective of the fact that each year more and more seniors enter the program, each year more and more seniors are living longer, productive lives, and each year new and life-saving medical advances are coming on line. For anesthesiologists, who, by and large, contract to treat any and all patients coming before them who are in need of medical care, this statement would appear to pit us and other similarly situated physicians against one another, fighting over a fixed Medicare pie.

In these same letters, Secretary Leavitt also indicated that Medicare Advantage (managed care) Plans, whose overhead for each patient has been estimated to cost the federal government significantly more per beneficiary than traditional fee-for-service Medicare plans, could not be scrutinized for necessary cost savings. With the nation’s health plans continuing to consolidate and achieve record profits each year, the Administration’s apparent protectionism of this newly privatized sector of Medicare seemed puzzling and unnecessary, especially as it came at the expense of rank-and-file physicians and their Medicare patients.

In the end, however, the veto threat of the Bush Administration prevailed, and Congressional negotiators were only able to cobble together a small, scaled-down bill with modest, temporary update increases and steep out-year cuts. Also lost in this fight, at least temporarily, was significant progress on ASA’s quest to restore funds taken away from academic anesthesiology programs by the Centers for Medicare & Medicaid Services “teaching rule,” which cuts Medicare payments by half for concurrent cases involving resident physicians and attending anesthesiologists.

So, what are ASA and all of medicine to do? Fight on, of course! Along with our coalition partners, including other state and national medical specialty societies and the American Medical Association, ASA remains committed to principled sustainable growth rate reform that is appropriately financed and allows for reasonable demographic and medically-based growth in Medicare Part B services, while preserving the traditional Medicare program for seniors and physicians. In like manner, ASA will continue to champion reforms unique to anesthesiology, such as restoration of full Medicare funding for teaching anesthesiologists. We have come a long way together in this Congress, let’s not give up!

Please actively consult our Web site at (www.asahq.org/government.htm#alerts) and join in ongoing calls to action. With more than one-quarter of the House and Senate members now supporting reform of the teaching rule, our base is solid and continues to grow. Let’s work together in 2008 to make our legislative goals a reality.