Groundbreaking Medicare Package Includes Fix for the “75% Rule” and Delays Physician Payment Cut

In Brief: The Academy successfully advocated for legislation approved by the House and Senate. While the president has signed into law some relief from the arcane “75% Rule,” Congress must re-address other Medicare issues midyear.

On December 29, 2007, President Bush signed into law legislation that freezes implemen?tation of the “75% Rule” at the 60% level and replaces a 10.1% cut to the Medicare physician payment update with a 0.5% increase through June 30, 2008. Ten days prior, while in the throes of intense lobbying efforts by organized medicine, Congress passed the legislation, which also extends, but does not expand, the current State Children’s Health Insurance Program through March 2009. For years, the Academy advocated on Capitol Hill around these issues and organized numerous member alerts to maximize grassroots’ success.

Following are more details on the provisions of the new law that are important to physiatrists.

The “75% Rule”

In addition to a permanent freeze on implementation of the rule at the 60% level, the new law allows comorbid conditions to continue to count toward meeting the rule’s threshold. The law also requires that the Department of Health and Human Services study beneficiary access to inpatient rehabilitation services and make recommendations for classifying inpatient rehabilitation hospitals and units. The provision marks a major accomplishment in the Academy’s efforts to strategically position physiatrists to freely determine which type of rehabilitation is medically necessary for any given patient. In December, the Academy issued a press release on the new law to external groups, including related organizations and friends in the disability comm?unities, stating that it “supports the law and views it as an intermediate phase in the process of improving access to acute comprehensive rehabilitation for people with disabilities.” This provision constitutes a huge victory for the specialty.

10% Medicare physician payment cut averted

Through another sustained advocacy campaign, the Academy, along with the American Medical Association and other national and state physicians’ societies, worked to reform the Medicare physician payment update. The new law postpones the 10% cut in the Medicare conversion factor that was slated to occur on January 1, 2008, for six months. This will be a 0.5% increase in the conversion factor from January through June 2008. Because this is a temporary fix, the Academy will continue to aggressively advocate for further reforms to this continuing Medicare crisis in an effort to preserve Medicare patients’ access to care. However, it is unclear how much progress Democratic leaders will be able to make on a large Medicare package in an election year.

Aside from the conversion factor change, there are other changes affecting 2008 Medicare payment rates. Payment changes will vary by service, specialty, and locality, based on the following factors:

• This year will be the second in a four-year transition to revised practice expense relative value units (RVUs).

• A number of services have revised RVUs for physician work. This change particularly affects other medical specialties, home health, and eye exam services, which increase significantly.

• The budget neutrality adjustment, created last year to adjust for changes from the five-year review of work values, has been increased. This will decrease payments for most services by about 1%.

• The geographic adjustment factors have been updated as they are every three years. The magnitude of the geographic changes is generally small, but it affects many payment localities. In addition, the law continues the limit on the work geographic practice cost indexes (GPCI) and the physician scarcity area bonuses until June 2008.

The combined impact of these various payment changes on members’ practices will depend on their specialty, location, and service mix. When all changes are averaged across all physicians, there should be a slightly positive increase in rates – but many physicians will see net decreases in payments.

Many other payers as well as Medicare Advantage plans link their rates to the Medicare rates in some way. Currently, no information is available regarding how other payers plan to adjust their rates in response to the six-month intervention by Congress.

Physician Quality Reporting Initiative (PQRI)

Physicians who participated in the PQRI program, reporting on quality measures from July through December 2007, are eligible to receive a bonus of 1.5% of their total Medicare-allowed charges for that six-month period. The bonus payments will be made in a lump sum after February 2008. The recently passed law will allow physicians who participate in the PQRI from January through December 2008 to receive a bonus of 1.5% of their total Medicare-allowed charges for the year 2008, as a lump sum payment after February 2009.

Exceptions process for outpatient therapy caps extended

Medicare will extend the current exceptions process for the caps on outpatient rehabilitation therapy services through June 30, 2008. This allows for continued access to outpatient rehabilitation therapy for the most vulnerable Medicare beneficiaries, those who need rehabilitation services the most. Congress will likely address this issue again before this extension expires. The Academy will continue to strongly advocate for a long-term fix.

Restriction on allowable Medicaid rehabilitation services delayed

The law places a six-month moratorium on the issuance of final regulations to restrict allowable services under the Medicaid Rehabilitation services option. The Academy will continue to strongly advocate the prevention of implementation of the final regulations.

Period to decide participation status extended

The law gives physicians an additional 45 days into the new year to decide their “participation” status with Medicare. During that time physicians have an opportunity to notify Medicare of whether they will be a “participating” or a “nonparticipating” physician in the coming year. With a 10% cut looming in the middle of the year, the participation decision is more complicated. While it is possible that the participation period decision will be reopened at that time, there is no guarantee.

Participating physicians agree to accept assignment on all their Medicare claims. Nonparticipating physicians can make assignment decisions on a claim-by-claim basis.

Medicare payment rates for non-participating physicians are 5% lower than payment rates for participating physicians, but non-participating physicians can balance bill patients for more than the Medicare rate, up to a “limiting charge” amount.

Physicians also have the ability to “opt out” of Medicare and privately contract with their patients, but neither they nor their patients can submit any claims to Medicare for their services for a two-year period.

What lies ahead – The challenge

While the president has signed into law some relief from the arcane “75% Rule,” Congress must re-address other Medicare issues midyear. The Academy will continue its major advocacy efforts to eliminate cuts or secure longer-term solutions to physician payment cuts scheduled for future years. The Academy will also continue its work toward abolishing caps on Medicare outpatient therapy services, which threaten the stability and quality of the Medicare program as well as patient access to much-needed care. Passing legislation by the June 30 deadline with a narrowly divided Senate will be difficult and is further complicated by the uncertainties of election-year politics. To succeed, all physicians’ groups must unify and mount a targeted national campaign that delivers a focused message for sound Medicare physician payment policies.

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