With doctors dropping out of the program in droves, leaving seniors scrounging for care, the Bush administration announced on Wednesday a new commitment to halting further reductions in the fees physicians receive from the government for treating Medicare patients.
The announcement, coming as both houses of Congress are considering the issue, all but ensures that the payment cuts, scheduled to take effect March 1, will be canceled.
"The physician thing is an emergency, and it needs to be fixed now," said Tom Scully, administrator of the Centers for Medicare and Medicaid Services. "It affects patients."
Scully's remarks at a health policy conference here included a prediction that health-care issues -- specifically, the Medicare prescription-drug benefit and tax credits for the uninsured -- will top this year's domestic political agenda.
He hinted at broader, long-lasting Medicare reforms to be proposed next week in President Bush's State of the Union address and, a few days later, in his budget for the next fiscal year.
"There will be lots of changes," he said.
While Bush is committed to securing a prescription drug benefit for Medicare's 40 million senior and disabled beneficiaries, administration officials have said he also believes that the $270-billion program should be overhauled in a way that fosters competition in the health-care market and controls costs.
Officials have declined to provide details, but the administration's proposals are likely to include a greater role for health maintenance organizations, as well as higher Medicare premiums for patients who do not join managed-care plans.
The administration's position on Medicare payments to doctors has evolved significantly. Last year, the president's top health-care advisors said Bush could not support higher payments for Medicare providers as long as elderly patients lacked prescription drug coverage.
But as the House and the Senate debated -- and ultimately deadlocked on -- different drug-benefit plans, hundreds of doctors across the country dropped their Medicare patients or refused to accept new ones, saying they could no longer afford to treat them.
Medicare fees to doctors were cut 5.4% last year, and the payment formula adopted by Congress in 1997 as part of the Balanced Budget Act calls for an additional 4.4% cut March 1.
Late last fall, the administration opposed congressional "giveback" proposals, which would have revised the payment schedule for physicians and increased payments to hospitals and other Medicare providers.
More recently, Scully and other officials called on Congress to "fix the formula" but said the administration could not prevent this year's payment cuts.
In the meantime, the American Medical Assn. and other physicians' groups have been lobbying Congress and the administration relentlessly to prevent the fee reductions. Because most insurance companies tie their reimbursement rates to Medicare fees, a cut in Medicare payments usually reduces the fees doctors receive for virtually all their patients.
Recent AMA survey data indicate that the March 1 reduction would lead at least half the physicians now caring for Medicare patients to reduce that work.
"It's all about access and keeping doctors afloat," said Dr. John Armstrong, a trauma surgeon in San Antonio and a member of the AMA board of trustees.
He described the doctors' group as "very pleased" with Scully's latest comments.
"We have to stop this barn from burning to the ground," he said, referring to the impact of fee cuts, "and after that, we need to rebuild the barn.... What we need now is action."
When that might come, and in what form, remains unclear.
Congress is weighing two proposals to effectively cancel the scheduled 4.4% cut, and the administration has expressed concerns about both of them.
Sen. Charles E. Grassley (R-Iowa) added a two-part Medicare payment adjustment to the spending bill now moving through the Senate.
It would freeze physician payments at last year's levels, at an estimated cost of $800 million through the end of the fiscal year, and, for about $300 million, would increase payment rates for rural and small urban hospitals.
But Scully reiterated the administration's opposition to any payment adjustments beyond those for doctors.
"The doctors' thing is a big mistake," he said. "All the other stuff can wait."
Scully has also expressed misgivings about a proposal by Rep. Bill Thomas (R-Bakersfield) to overturn the federal regulation that mandates this year's fee reduction. Scully said the rarely used legislative maneuver would scuttle too many other payment provisions.
Nevertheless, Republican aides in both the Senate and the House expressed new confidence that some version of the payment adjustment will pass and take effect before March 1.