Physicians who treat Medicare beneficiaries received an 11th-hour reprieve from a scheduled 10-plus percent reduction in Medicare payments thanks to legislation enacted by Congress and signed into law by President Bush in late December 2007.

The relief, however, which also provides doctors with a small half-percentage point increase in Medicare payments, may be short lived. Under the provision included in a larger legislative package that also extends the State Children’s Health Insurance Program (SCHIP), the 10 percent cut will take affect July 1, 2008 unless Congress and the Administration take action.

In a recent communication to Congress from the Centers for Medicare and Medicaid Services (CMS), the agency noted that the late date for enactment of this change (Dec. 29, 2007) has resulted in some procedural delays, but that it hopes reprocessing of claims can be avoided. Additionally, CMS is giving providers an additional 45 days—through February 15, 2008—to decide whether they will participate in the Medicare program.

Given the significant impact such a large cut would likely have on the Medicare program, it is very likely that Congress will take action to further postpone the cuts, and may do so earlier than originally anticipated. Medicare policy leaders in Congress are already talking about taking up a Medicare package, beginning in March, that would likely further postpone the physician cuts, perhaps for up to 18 months until January 1, 2010.

Also recently, the Medicare Payment Advisory Commission (MedPAC) voted to recommend a 1.1 percent payment increase for doctors next year. While continued support for a small increase rather than a significant cut is positive, provider groups are concerned that another recommendation of a one-year fix will further delay efforts to reform the payment system.

Many lawmakers want to spare doctors from the looming 10 percent reduction, but there continues to be much disagreement within Congress and the Administration as to how to pay for this measure, with steep cuts to Medicare Advantage occupying center-stage.

Another issue worth paying attention to for doctors is the mounting movement in Congress toward significantly increasing government funding for "comparative effectiveness" research on medical treatments including devices and pharmaceuticals. As this issue gains momentum as another way of helping Medicare reign in spending, the day may come when Medicare will only reimburse physicians who use treatments shown to be most effective.