Medical Device Daily Washington Editor

WASHINGTON — The Senate yesterday inked a Medicare funding bill that averts the impending 10.6% cuts to physician fees, but the process was exhausting for both political parties (Medical Device Daily, July 10, 2008). The bill also left a few issues to be dealt with in the 111th Congress, not the least of which is the bidding program for durable medical equipment (DME).

However, news of an impending White House veto swirled around the nation's capital yesterday afternoon, with wire services reporting that the administration's spokesman, Tony Fratto, has said that "taking choices away from seniors in order to pay for the reimbursements for physicians is the wrong way to pass this bill and to extend the reimbursements that we want to see physicians get."

The House bill, H.R. 6331, which the Senate adopted after its own bill failed to gain sufficient support, replaces the 10.6% cuts with a raise of half a percent for the balance of calendar year 2008 and a 1.1% boost in 2009. The Bush administration has lodged no objections to the suspension of SGR or to the pay raise, which was suggested by the Medicare Payment Advisory Commission (MedPAC).

Unfortunately for the 111th Congress, the bill also does nothing to address the sustainable growth rate mechanism (SGR) adopted by Congress to control runaway Medicare spending.

One of the most contentious features of negotiations between the two sides was the amount paid to Medicare Part C managed care plans, known as Medicare Advantage (MA) plans. The Centers for Medicare & Medicaid Services typically pays managed care plans about 13% more than fee-for-service docs get under Part B. The payment disparity is greater for fee-for-service plans that operate under Medicare Part C, which are said to be paid 17% more than Part B providers.

Physicians and providers of DME would both be subject to a levy program that allows the Internal Revenue Service to collect unpaid taxes, addressing a recent GAO report that a number of providers are behind on payroll taxes (Medical Device Daily, June 25, 2008).

H.R. 6331 would eliminate reimbursements for indirect medical education (IME) to MA plans, which those plans forward to hospitals. Critics of the IME payments argue that those payments are duplicative of payments that hospitals are already receiving, and the lack of a requirement that MA plans actually forward IME monies to hospitals have fed suspicions that MA plans are retaining monies not due them.

The success of the bill also delays the DME bidding program until 2011. The first round of bids would be cancelled altogether, but the bill would also trim expenditures on the items that were subject to bidding by 9.5%.

Medicare's DME expenditures have been the subject of charges of fraud for more than a decade, but deputy administrator Herb Kuhn claimed recently that the agency has cut into the problem. On the other hand, Mike Leavitt, Secretary of Health and Human Services, made clear that the administration's position is that Medicare and beneficiaries pay too much for such provisions (Medical Device Daily, July 10, 2008).

Reaction from congressional Democrats was immediate. Rep. Nancy Pelosi (D-California), the House speaker, said the Senate vote "sends a clear message to President Bush that our efforts to strengthen Medicare for our seniors should become law, with or without his signature."

James Rohack, MD, president-elect of the American Medical Association (AMA; Chicago) said in a June 9 statement that the association "celebrates that the Senate heard the voices of patients and physicians and voted to stop Medicare physician payment cuts that would have hurt seniors' access to care by a bipartisan, veto-proof majority of 69 to 30." He also said that AMA "applaud[s] those who ... voted yes even though they had concerns about the process or some of the bill's provisions."

Joseph Antos, a scholar specializing in healthcare and retirement issues at the American Enterprise Institute (AEI; Washington), told Medical Device Daily that CMS first designed a DME bidding project 20 years ago and although there were problems with that first iteration, the agency has "a much better method for handling the bids." He also said that despite concerns about the impact on small businesses, CMS has "done the best they can within fiscal prudence to keep as many local suppliers as possible."

Antos claimed that the absence of a bidding program is "keeping high-priced suppliers in business and forgoing [savings to] taxpayers and beneficiaries."

When asked about beneficiary access to DME, he said "there's always a concern about access," which "should always be the first question. Congress is fulfilling its function to raise these questions." However, he took the position that "from what I can tell, CMS has answered all those questions."

Antos said that the "dead doc" fraud that generated so much coverage recently might not be as problematic as is often assumed, stating that some of those claims are from doctors working in the same practice as the deceased or retired physician. He pegged the percentage of "dead doc" fraudulent claims at less than 50%, although he said physician practices have been less than vigilant about updating codes in their office IT systems.

Antos said that payments to MA plans were boosted in 2003 because of tepid growth after they were introduced six years earlier. As for why MA plans have yet to grow enough to sustain themselves on a lower reimbursement schedule, Antos said "this is a policy-induced failure."

He said there is no mechanism to wean them off high payments and "take advantage of competition to lower costs." Antos observed "there's no real reason why Congress could not adopt some ideas that would improve the bidding process and make it work the way it's supposed to work," which would "press reimbursement rates down."

"We have to get the plans into a bidding process," Antos said.