updated 11/2/2005 7:01:46 PM ET 2005-11-03T00:01:46

Final federal rules issued Wednesday will cut Medicare’s reimbursement rates for doctors next year by 4.4 percent while increasing payments for most hospitals by at least 3.7 percent.

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Doctors have said that such a cut in their reimbursement rates would prompt many to stop seeing Medicare patients. Congress has indicated a willingness to address their concerns; the Senate Finance Committee last week approved a bill that would give physicians a 1 percent increase in their rates next year.

Officials at the Centers for Medicare and Medicaid Services say they lack the power to change that formula that sets the reimbursement rate.

Medicare is the federal program that provides health care to some 42 million older and disabled Americans.

“The existing law calls for a decrease in payment rates for physicians in response to continue rapid increases in use of services and spending growth, and Medicare does not have the authority to change this,” said the centers’ administrator, Mark McClellan.

McClellan added that the cut is further proof that Medicare needs to revamp its payment system, which pays a fee whenever a particular service is performed. Officials want to move to a system that pays based on the quality of the care delivered.

About 3,800 hospitals will see a 3.7 percent increase in their Medicare payment rates next year for outpatient services.

Some 400 rural hospitals will get an additional 7.1 percent payment increase.

Medicare officials also said the rule will enhance preventive care. It will increase payment rates to hospitals for most screening examinations that Medicare covers.

For example, the fee for the physical that recipients get when they enter the program will be increased by 7 percent next year when the physical is furnished in a hospital’s outpatient department.

The rules issued effect services provided in 2006. While many lawmakers will work to increase the reimbursement rate for physicians, that would also have the effect of increasing premiums for Medicare beneficiaries, beginning in 2007.

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