The California Medical Association (CMA) is urging Congress to fix Medicare's outdated geographic payment localities as part of any effort to repeal the sustainable growth rate (SGR) payment formula.

In a recent letter to Congress, CMA proposed two solutions to this long standing problem that has underpaid physicians in a number of recently urbanized areas. The letter was sent to Dave Camp (R-MI), Chairman of the House Committee on Ways and Means, Fred Upton (R-MI), Chairman of the House Committee on Energy Commerce, and Senate Finance Committee leaders, Chairman Max Baucus (D-MT) and Senator Orrin Hatch (R-UT), who are authoring legislation to repeal and replace the SGR.

The first solution proposed by CMA is a pilot project limited to California that would update the California Medicare physician payment localities by changing them to follow the same Metropolitan Statistical Areas (MSAs) used to pay hospitals.

The MSAs used to determine payment rates for hospitals are continuously updated, so that reimbursement accurately reflects local costs to deliver care. The physician payment localities, on the other hand, have not been updated in 15 years. As a result, 14 urban California counties, such as San Diego, Monterey and Sacramento, are still designated as rural. This has caused many California physicians to be paid up to 10 percent per year below what Medicare says they should be paid if they were in the correct region.

The pilot would be a temporary, budget-neutral solution that would raise payment levels for urban counties misclassified as rural, while holding remaining rural counties harmless from cuts.

Although the payment discrepancies are most egregious in our state, with California accounting for half of all payment anomalies in the country, a number of other states are experiencing similar problems. According to CMA’s latest analysis, the four states with the highest average payment error rate are California, Maryland, Virginia and Illinois. The second approach proposed by CMA would be a similar multi-state pilot for these four most impacted states.

In both instances, CMA is urging that the remaining rural counties be "held harmless" from cuts that would otherwise result as the result of budget neutrality requirements.

CMA also suggested that another larger approach could be to develop a supplemental rural payment rate to offset the rate reductions that would be experienced by physicians in the locality reconfiguration regions and to help attract physicians to rural areas across the country.

Next week, CMA will be in Washington, D.C., to urge the committee leaders to include the locality update in the Medicare SGR legislation. CMA has also been invited to make a presentation before the California Congressional Caucus on Medicare payment reform. Larry deGhetaldi, M.D., former CMA trustee and chairman of the CMA Medicare Committee will make the presentation.

Contact: Elizabeth McNeil, (800) 786-4262 or emcneil@cmadocs.org.