Today I am joining my colleagues in introducing the Medicare Physician Payment Fairness Act of 2001, which temporarily corrects a problem with the physician payment formula to ensure that the payment reductions do not jeopardize Medicare beneficiaries’ access to care.

On November 1st, the Centers for Medicare and Medicaid Services announced it will lower payment rates for 2002 under the Medicare Physician Fee Schedule. The Congressional Budget Office indicates that this change will result in a $2.0 billion reduction in payments for 2002.

Reductions of this magnitude were completely unexpected and stem from two major factors: the downturn of the economy and related reduction in the Gross Domestic Product that is used to establish the sustainable growth rate for physician spending, and an error on the part of the government in collecting physician payment information.

This drastic reduction may have a detrimental effect on physician willingness to participate in Medicare and thus on seniors’ access to physician services. Our legislation will prevent these immediate, draconian reductions in payments for one year in order for MedPAC to study the matter and report to Congress by this coming March on a way to replace the current formula with a new factor that more fully accounts for changes in the costs of providing physician services.

The bill that we are introducing today would change the physician payment conversion factor for 2002 to 0.9 percent below 2001 levels, instead of the 5.4 percent reduction announced by the Administration. This number reflects approximately what the update would be if the two elements that physicians have no control over – the downturn in the economy and government errors – were factored out. Preliminary estimates from the Congressional Budget Office place the cost of the bill at $1.5 billion over five years.

The Medicare Physician Payment Fairness Act of 2001 gives physicians needed respite from unforseen problems in their payment formula while Congress and policy experts can devise another method for physician payment. As such, it helps to ensure that payment reductions do not jeopardize beneficiary access to care. I urge my colleagues to support this legislation.