House to Address RVU Formula In May, But Solution Still in Air

House Republican leaders want to pass a single bill addressing a new formula for annually updating the Medicare conversion factor that translates RVUs into dollars, along with a Medicare drug benefit and other payment and reform issues under the program, all by Memorial Day, a senior House staff member said.

John McManus, staff director to the health subcommittee of the Ways and Means Committee, suggested in a talk to the April 4 convention of the National Association of Physician Recruiters in Washington, D.C., that a new formula probably would mandate further cuts in the RVU dollar value, but not as steep as the current formula would require.

Patrick Smith, MGMA vice president for government affairs, said April 26 that Ways & Means Chairman Bill Thomas (R-Calif.) and Energy & Commerce Committee Chairman Billy Tauzin (R-La.) each have developed one or more proposals for the RVU update formula as well as other Medicare issues, but that the proposals weren’t public yet. As of that date, Smith said, the proposals’ costs were being estimated or “scored” by the Congressional Budget Office, a preliminary step to voting on them.

Senate Waiting for House Action

In the Senate, the Democratic leadership intends to develop a prescription drug plan first, and then address the RVU formula and other issues, he said. Overwhelming majorities in both houses are on record as favoring some fix to the existing formula, Smith noted.

The Senate probably will wait until the House completes action on an entire Medicare package to vote on its version, Smith said. “At this point, I wouldn’t make any wagers on how the [RVU conversion factor issue] will come out,” he cautioned.

Any new proposal would have a tremendous cost burden to bear, McManus explained, because the current formula is expected to save Medicare around $100 billion over the next five years by cutting the RVU dollar value 5.7% in 2003 and 2004 and 2.8% in 2005, before registering a positive blip of 0.1% in 2006. Noting that these cuts would put 2005 reimbursements at the level they were in 1993 (not counting RVU procedure value changes), McManus declared, “We have to fix that.”

The cost of H.R. 3882, which would implement the update system proposed by the Medicare Payment Advisory Commission in January, is estimated at $126 billion over five years, not mainly because it would raise payment levels so much above present ones, but instead because it would erase the expected further cuts under the current formula.

Asked by PCR what he thought about the “budget-neutral” concept floated by CMS Administrator Thomas Scully–which would require any added payments to physicians under a new formula to be offset by planned cuts to other providers–McManus said Thomas and Johnson “have concerns about it.” But they feel constrained to work with it because their top priority is the Medicare prescription drug benefit and because the Bush administration favors the concept.

Russell Coile Jr., head of Superior Consultants in Plano, Texas, told PCR that the RVU update issue “could be a long battle. It took hospitals three years to get their deepest cuts [from the Balanced Budget Act of 1997] reversed.”

Scully: ‘Congress Will Fix It’

“I think Congress will act to fix” problems in the RVU dollar value update formula, but the forecasted 5.7% in 2003 cut probably will occur, Scully predicted in an April 3 talk at an American Health Lawyers Association conference in Baltimore.

Scully did not offer any suggestions for the shape of a new updating system, but like McManus, cautioned that any cost changes engineered by a new formula would have to be moderate.

He called this year’s 5.4% cut “harsh,” but said physicians had been “overpaid” by overly generous increases in the RVU dollar value the previous two years.

Contact McManus at Ways&Means, Scully at (202) 690-6726 or, and Smith at (202) 293-3450.

COPYRIGHT 2002 Atlantic Information Services, Inc.

COPYRIGHT 2003 Gale Group

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