WASHINGTON — Doctors will see a 5.1 percent cut in their reimbursement rates for Medicare patients next year, according to proposed federal rules announced yesterday.

Hospitals will gain a 3 percent increase in their reimbursement rates for outpatient care, but will get the full increase only if they submit data to the government indicating they're following guidelines that improve patient care.

Mark McClellan, who oversees the Medicare program in the Bush administration, said the proposed cut in doctors' payments and the call for more quality reporting from hospitals arise from a payment system in the United States that can't be sustained without change.

"We need to get out of the vicious cycle of rapid growth in utilization and spending," McClellan said.

Local reaction to the proposal was mostly negative, with the chairman of the Hawai'i Medical Association and others saying it would make it more difficult for physicians to practice here.

Under the current system, Medicare pays a set fee when a particular service is performed. As a result, there is an incentive to order more procedures per patient, and that's occurring at a dramatic rate, McClellan said.

For example, payments to hospitals for outpatient work went up nearly 12 percent in 2006, mainly because of growth in the number and intensity of treatments. Estimates are that payments will go up 9.2 percent next year, he said, even though payments for any particular service are going up only 3 percent on average.

McClellan said the growth in services per patient is of great concern because of its effect on taxpayers and Medicare beneficiaries who pay higher premiums. Those premiums are expected to rise to nearly $100 a month next year.

McClellan also said there is no clear evidence that patients are better served through the increase in treatments, which is why he wants hospitals to submit more details about the care they provide. Failure to submit the data will result in lower payments, he said.

"Doing nothing is not sustainable from the standpoint of Medicare costs and beneficiary premiums," he said.

HELP FROM CONGRESS?

The proposed cut in payments to doctors was expected. However, the American Medical Association has aggressively lobbied Congress to step in, which is something lawmakers have routinely done over the years.

"Seniors who rely on Medicare and the physicians who care for them are stuck wondering if 2007 will be the year access to care erodes as we wait for congressional action to stop the Medicare payment cuts," said Dr. Cecil Wilson, chairman of the AMA's board of trustees.

Locally, state Sen. Roz Baker, chairwoman of the Senate Health Committee, said she was dismayed by the proposal.

"It just does not make sense," said Baker, D-5th (W. Maui, S. Maui). "You cannot try to balance the human service budget on the backs of people (physicians) that are vital to providing good care for seniors and others. To me, it's the wrong way to go."

TURNING AWAY PATIENTS

Retired physician Bernard W.D. Fong previously served as medical director in charge of the Part B Medicare Program for the Noridian Co., which administered the Medicare Part B program under contract for the state. He echoed Baker's comments.

"The proposed changes would dislocate doctors' fees and subsequently, there would be a significant reduction in physicians accepting patients who are on Medicare," Fong said.

A study by the American Academy of General Practice two years ago showed an estimated 27 percent of doctors were turning away new Medicare patients, he said.

Fong said despite myriad personal contacts he has had difficulty finding a primary care physician.

The problem stems from the federal government's difficulty in calculating the increase in medical cost growth rates, something it has been wrestling with for the past decade, Fong said.

Philip Hellreich, legislative chairman for the Hawai'i Medical Association, said the administration has proposed cuts in Medicare reimbursements for the past several years, proposals that have been nullified by Congress after intense lobbying by the American Medical Association.

But if the cuts were to be instituted, "it would have a horrible effect on access to care," Hellreich said.

A 'BAD EFFECT' LOCALLY

Hawai'i's Medicare reimbursement rates are lower because they are lumped in the same category as more rural areas, and not big regions like New York or California, despite the higher cost of living here, he said.

On top of that, other health providers — from the state's worker's compensation system to private insurers like HMSA — base their payments on a percentage of Medicare.

"So if Medicare rates actually were to go down and other insurance carriers were to lower their reimbursements accordingly, it would have a tremendously bad effect on access to care here," Hellreich said.

Hellreich said the combination of high malpractice insurance premium rates and low reimbursement rates makes it increasingly more difficult for doctors to practice in Hawai'i.

"We're the only industry where you can't pass off rising costs to the consumers," said Hellreich, a native New Yorker. "If I were now looking for a place to practice, I would never choose Hawai'i, which is a shame. A lot of our most highly skilled doctors, who are 40 to 60 years old, either have left or are thinking of leaving because they just can't make it here."