A congressional advisory panel is recommending that all physicians receive a 1.1% increase in their Medicare fees in 1996, a proposal that would end Medicare's practice of separate adjustments for primary-care doctors and specialists.
If Congress does not approve such an adjustment, known as a payment update, primary-care physicians would see their fees reduced 2.2%, while surgery fees would rise 3.9%. Other specialist fees would rise 0.6% under default formulas built into the physician-payment system, according to the Physician Payment Review Commission.
The commission's recommendation of a single update comes as it is grappling with a payment system that increasingly is rewarding surgeons more than primary-care doctors. That is contrary to what the architects of the payment system wanted. Their goal was to encourage less expensive primary care by valuing such services more.
And because of the default formula's idiosyncrasies, Medicare physician fees are projected to begin declining as early as 1997. To solve that problem, the commission already has recommended basing future growth standards on increases in the gross domestic product.
Total Medicare payments to physicians in fiscal 1995, which began Oct. 1, 1994, are projected to reach $32.8 billion, according to the Congressional Budget Office.
The physician fee schedule calculates payments by placing a specific dollar value on each unit of work involved in performing a service or procedure. Under a 1.1% increase for all services in 1996, primary-care services would be valued at $36.78 per unit of work, surgery at $39.88 and other nonsurgical procedures at $35.
Under the default formula, physician fees would drop to $35.58 per unit of work, while surgery would rise to $40.99, and other nonsurgical procedures would rise to $34.82.
As a cost-containment mechanism, HCFA calculates physician fees based partly on a performance standard of volume growth that doctors are expected to meet or beat.
Inflation sets the baseline for the year-to-year fee update. The fee update is reduced if volume grows faster than the performance standard and increased if it grows slower.
Low volume growth in recent years has meant that doctors have seen generous fee increases, but that isn't expected to continue.