Additional Talking Points:

These cuts cannot be sustained and could lead to a health care access crisis for America's seniors.

Congress recently passed legislation reversing the physician payment cut of 4.4 percent that went into effect on Jan. 1, 2006, and setting the Medicare conversion factor at its 2005 level. Although payment rates for some localities and services are higher or lower than in 2005 due to geographic adjustments and other payment policies outlined in the 2006 Medicare physician payment schedule final rule, the legislation reversed the across-the-board cut due to the fatally flawed payment update formula.

The 2006 Medicare Trustees report forecasts a cut of about 5 percent in 2007 and cumulative cuts of more than a third by 2015. Clearly, the Medicare physician payment update system needs to be reformed. If it is not, Medicare payment rates in 2007 will have fallen 20 percent below increases in physicians’ costs since 2001.

Physician payment updates are driven by a flawed formula called the Sustainable Growth Rate, or SGR. Instead of the SGR, payment updates should be based on annual increases in practice costs, as recommended by the Medicare Payment Advisory Commission.

Other Medicare providers are not subject to the SGR. In fact, hospital payments are slated to continue to rise by more than 3 percent a year under current law and payments to Medicare Advantage plans are estimated to increase by 7.1 percent in 2007.

Results of a recent American Medical Association Member Connect Survey (2006 AMA Medicare Physician Payment Survey [PDF, 164KB]) indicate that Medicare payment cuts to physicians will hurt access to care for America's seniors. The results show that 45 percent of physicians will either stop accepting or decrease the number of new Medicare patients they accept if Medicare payments are cut in 2007.