Medicare bill would blunt the impact of budget neutrality on physician payment

AADA advocacy culminates in changes reducing physician, patient burden

Legislation introduced in the U.S. House of Representatives on March 30 seeks to advance one of the Academy’s major Medicare goals, addressing budget neutrality requirements which have driven cuts in Medicare physician payment in recent years and have not been updated since 1992. Budget neutrality requires that when there are increases in the Medicare physician fee schedule in one area, they must be offset by cuts in another. 

The bipartisan bill, dubbed the Provider Reimbursement Stability Act, was introduced by Rep. Greg Murphy, MD, of North Carolina, and would:

• Increase the threshold at which budget neutrality is triggered from a $20 million increase to $54.3 million with cumulative adjustments made every five years based on the Medicare Economic Index.

• Allow for corrections when CMS misestimates utilization of codes, triggering budget neutrality and driving down the conversion factor.

• Provide updates to direct costs used to calculate practice expenses at least every five years, partially addressing the impact of inflation on practices.

• Limit year-to-year variance in the conversion factor to no more than +/- 2.5%.

The limit on conversion factor variances is notable as it provides a guardrail against the drastic cuts in payment physicians have experienced recently. 

This bipartisan legislation demonstrates congressional support for addressing the physician payment crisis despite the challenging political atmosphere. Academy support for the bill follows earlier support for another piece of legislation, the Strengthening Medicare for Patients and Providers Act, that would provide an inflationary adjustment tied to the Medicare Economic Index for Medicare physician payment.

Medicare physician payment reform is the AADA’s chief federal legislative priority, with the goals of replacing or eliminating budget neutrality as well as securing an annual inflationary update. Your voice is critical to our success. Look for a grassroots alert from the AADA and tell your member of Congress to support the Provider Reimbursement Stability Act.