Bill Would Cap Total Medicare Fees for Doctors

A key House subcommittee is preparing legislation calling for a radical overhaul of Medicare payments to doctors, including an unprecedented cap on total federal spending for physicians’ services.

The proposed new payment program, a complex package developed in a series of closed sessions with the tentative blessing of the Bush Administration, is aimed at curbing the explosive inflation in medical costs.

The far-reaching plan would also cut payments to doctors for a series of procedures considered overpriced, including coronary bypass surgery, hip replacements, hernia repairs and cataract surgery, which are among the most common operations for the 30 million Americans over 65 enrolled in Medicare.

Cuts of Up to 15% Wanted

The lawmakers want to cut federal payments to doctors for those procedures by up to 15%.

“There is a coalition of Republicans and Democrats and the Administration” writing the legislation this week, said Rep. Pete Stark (D-Oakland), chairman of the health subcommittee of the House Ways and Means Committee. “We are trying to limit the total amount we spend.”

Stark said that the coalition wants doctors to participate in the planning and observed: “If we can’t control costs, we will spend more for Medicare than for the Defense Department by the end of the century.”

Medicare spending on physicians’ services this year is expected to exceed $25 billion. The subcommittee is considering a ceiling that would limit increases for 1990 to 10% to 12%, compared to the 13% inflation rate expected in doctors’ services without cost controls.

Such a limit on doctors’ incomes is certain to be vigorously resisted by organized medicine.

“No matter how you try to sugarcoat it, it will be a cap,” said Dr. James S. Todd, senior deputy executive vice president of the American Medical Assn. If the cap reduces payments to doctors, they may shy away from caring for Medicare patients, he warned.

“What happens when the doctor cannot care for the same volume of Medicare patients and be economically viable?” Todd asked.

The medical profession fears that a ceiling on spending would eventually lead to drastic reductions in fees.

AMA Attitude Assailed

Stark said some medical groups are willing to negotiate with Congress on the idea of an expenditure target. “But the AMA does not want to cooperate,” Stark said. “It simply wants doctors to collect as much income as they can.”

However, Stark and the AMA, longtime political antagonists, do agree on the need for a national fee schedule.

Doctors would know with certainty what they are going to receive, and patients could compare charges among doctors to see if the fee is reasonable, Todd said, adding: “We need to rationalize the manner in which physicians are paid and give it predictability.”

The proposed legislation includes a national fee scale for each procedure, treatment and operation performed by doctors. Since 1983, Medicare has imposed a similar fee schedule on hospitals, with fixed payments for each illness.

Doctors are now paid by Medicare in a complex, cumbersome fashion with fees dependent on the doctor’s own charges in past years and the customary fees in the local community.

Some to Get Higher Fees

Under the subcommittee’s plan, a payment scale would be adopted, cutting the incomes of some specialists such as surgeons but increasing the fees for services provided by internists and general practitioners.

The scales, with adjustments for local variations in the cost of running a medical practice, will have extensive impacts. Doctors in Los Angeles and New York, for example, would receive lower fees, but payments would rise in Chicago.

However, the fee schedule, designed to begin Jan. 1, 1991, would not cut an individual physician’s fees more than 15% in a single year for a particular procedure.

“Even if you look at the cost of living and the expense of a medical practice, that does not explain why the same operation might cost $6,000 in Manhattan and $2,300 at the Mayo Clinic in Rochester, Minn.,” a subcommittee aide said.

Holding Closed Sessions

The ambitious legislative package to control the growth of spending for physicians’ services is being prepared in closed sessions by the health subcommittee. Bush Administration budget officials like the idea of a target for total spending to help them cope with the massive federal budget deficit, congressional sources said.

Backers of the cost-control legislation are optimistic that it will be approved by the full House Ways and Means Committee and, ultimately, by Congress. However, the Senate has not yet begun detailed work on its version of the bill.

The plan is designed to restrict payments to doctors while limiting the effect on the finances of Medicare patients. Currently, Medicare pays for 80% of what it considers a customary fee, and patients pay the rest. Under the proposed legislation, doctors would be forbidden to charge Medicare patients more than 25% above the fee approved by the federal program.

A Freeze on Part B Fees

The legislation would also freeze for 1990 the monthly $31.90 payments by Medicare beneficiaries for Part B insurance, which covers doctors’ services.

Under the House subcommittee bill, Congress would establish in 1990 a target for spending for physicians’ services under Medicare. If actual spending exceeds the target, the secretary of health and human services could cut the payments for particular medical procedures, such as cataract surgery, or fees to groups of doctors, such as Los Angeles heart surgeons.