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CMS plans to cut Medicare payments by 10.6%

August 4, 2020

Topics: Quote of the Day

CMS.gov, August 3, 2020

On August 3, 2020, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that announces and solicits public comments on proposed policy changes for Medicare payments under the Physician Fee Schedule (PFS), and other Medicare Part B issues, on or after January 1, 2021.

Since 1992, Medicare has paid for the services of physicians and other billing professionals under the PFS.

Payments are based on the relative resources typically used to furnish the service. Relative value units (RVUs) are applied to each service for physician work, practice expense, and malpractice. These RVUs become payment rates through the application of a conversion factor. Payment rates are calculated to include an overall payment update specified by statute.

CY 2021 PFS Ratesetting and Conversion Factor

We are proposing a series of standard technical proposals involving practice expense, including the implementation of the third year of the market-based supply and equipment pricing update, and standard ratesetting refinements to update premium data involving malpractice expense and geographic practice cost indices (GPCIs).

With the budget neutrality adjustment to account for changes in RVUs, as required by law, the proposed CY 2021 PFS conversion factor is $32.26, a decrease of $3.83 from the CY 2020 PFS conversion factor of $36.09.



By Don McCanne, M.D.

Each year, in their efforts to privatize Medicare, CMS has used innovative accounting maneuvers to increase the payment rates for the private Medicare Advantage (MA) plans, while neglecting the traditional Medicare program. This has allowed the MA plans to charge lower premium rates and to provide extra benefits which then gives the private plans an unfair competitive advantage over the traditional fee-for-service Medicare program (FFS). The resulting marketing advantage has been effective in increasing enrollment in the private MA plans.

Once enrollment increased in the private plans it was assumed that CMS would decrease funding of the traditional FFS Medicare program causing it to wilt on the vine (or be drowned in a bathtub, in the words of Grover Norquist). It looks like we are entering that phase.

One innovative accounting maneuver for FFS Medicare available to CMS is making a “budget neutrality adjustment.” Imagine the variables that they can conjure up to make these adjustments. Whatever they did, they are rationalizing a 10.6 percent reduction in FFS payments beginning in January – this in a system that many complain is already chronically underfunded.

What do you suppose physicians will do five months from now when they see a ten percent reduction in their FFS Medicare payments? That’s on top of the stresses of a pandemic and a recession. And the private insurance sector and their Wall Street barons are going to have the answers? We may be headed for more disruption, and not the good kind.

A well designed, single payer Medicare for All program could salvage our health care system, but we have to elect public stewards who are dedicated to the best interests of patients. Supporting the system through adequate funding is in the best interests of patients.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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