MedPAC Agrees with CMS: Reduce Physician Payment for 2007

The Centers for Medicare & Medicaid Services (CMS) has estimated that it will reduce physician payment by 4.6% for 2007, the maximum cut allowed according to a formula in the law. In a recent report, the Medicare Payment Advisory Commission (MedPAC) concurred with this CMS estimate. MedPAC noted that this is the third estimate of such a large so-called “negative update” but no such reduction has occurred since 2002 because Congress has overridden the formula.

To calculate the update, CMS estimated that the volume of physician services grew by 7.5% in 2005. This follows a growth of 8% in 2004. Volume growth exceeding growth in the economy is an important factor leading to payment cuts. MedPAC is preparing a report for release next year reviewing alternatives to the current update formula.