The 15% Medicare Doc Cut and Medicare Advantage Payments--The Battle Has Begun Again

Key players in the Congress are voicing some optimism that they can fix the 10% reduction in Medicare physician fees that will occur on July 1 and the further 5% reduction that is on track to follow on January 1, 2009.

It is not surprising that Democrats would be sounding optimistic this early in the new session, but what is interesting is that we are hearing some willingness to compromise on the part of Republicans.

Look for Senate Finance, the place any real deal would be done, to take the lead with a package worth $12 to $15 billion over five years that would take care of the docs for 18 months--until January 1, 2010.

Where would the money come from?

The target is still Medicare Advantage payments to HMOs.

But here is where it gets interesting. Key Republicans, while warning that any deep cuts to the private Medicare program are off the table, are saying they could go along with cuts to the hugely profitable Medicare Private Fee For Service (PFFS) portion of the program.

Since only a couple of the HMOs have made a big play in this controversial portion of the private Medicare business, most Medicare insurers would be happy to cut this part loose to save the core of the program.

It is early and members of Congress are always way too optimistic about what they can accomplish before the real work starts. But, these rumblings about Republicans willing to put the PFFS payments on the table is a bit of a surprise after all the acrimony that surrounded the budget last fall.