December 2003 AAOS Report

Increase passed for 2004 and 2005 in Medicare Physician Payment Update

At the end of November, both the U.S. House of Representatives and the Senate approved the Medicare Prescription Drug, Improvement, and Modernization Act, which includes provisions to provide for a 1.5 percent increase in the Medicare Physician Payment Update for fiscal year 2004 and 2005. This legislation, which is expected to be signed into Public Law, includes this temporary two-year fix to avert and overturn the 4.5 percent cut in payment set to take effect under the final regulations issued by the Centers for Medicare and Medicaid Services on November 7, 2003. In addition, under the recently enacted provisions, a 10-year rolling average of per capita growth in the Gross Domestic Product will be incorporated into the existing formula calculation to assist in minimizing radical annual changes in payments. However, because the Medicare formula was not changed significantly in this legislation, it will revert back to the existing flawed sustainable growth rate formula in 2006, and significant reductions in the annual payment updates are anticipated through to 2010 unless Congress acts to change the permanent correct the formula during this two-year window.

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