On July 1, 2009, the federal Centers for Medicare and Medicaid Services (CMS) released a proposal for the Medicare 2010 Physician Fee Schedule. The CMS estimates that the update for physician services will decrease by 21.5% from calendar year (CY) 2009. In general, the proposal would cut Medicare payments for imaging and specialists and use those savings to increase payments for primary care services. The payment formula has produced negative updates since 2002; however, from 2004 to 2009, Congress approved a series of legislation that prevented the cuts from being enacted. The Medicare law requires CMS to adjust the Medicare 2010 Physician Fee Schedule payment rates annually based on an update formula that includes application of the Sustainable Growth Rate or SGR that was adopted in the Balanced Budget Act of 1997. This formula has yielded negative updates every year beginning in CY 2002, although CMS was able to take administrative steps to avert a reduction in CY 2003, and Congress has taken a series of legislative actions to prevent reductions in CYs 2004–2009. Based on current data, CMS is projecting a rate reduction of 21.5% for CY 2010. CMS is making several proposals to refine Medicare payments to physicians that are expected to increase payment rates for primary care services. The proposals include an update to the practice expense component of physician fees. For 2010, CMS is proposing to include data about physicians' practice costs from a new survey, the Physician Practice Information Survey, designed and conducted by the American Medical Association. CMS is proposing to increase the payment rates for the Initial Preventive Physical Exam (IPPE), also called the “Welcome to Medicare” visit, to be more in line with payment rates for higher complexity services. The IPPE benefit was mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 to pay for an initial assessment of key elements of a beneficiary's health status within six months of the beneficiary's enrollment in Medicare Part B. Subsequently, Congress extended the time period for the IPPE benefit to within 1 year of the beneficiary's enrollment in Part B. In addition, CMS is proposing to refine how Medicare recognizes the cost of professional liability insurance in its payment system. “While these changes would have a modest impact, they will promote payment equity by redirecting the portion of Medicare's payment for professional liability insurance to those physicians that have the highest malpractice costs,” the agency says. “Taken together, refining the practice expenses, eliminating payment for the consultation codes and revising the treatment of malpractice premiums would increase payments to general practitioners, family physicians, internists, and geriatric specialists by between 6 and 8 percent (before taking into account the proposed update and other proposed changes to the fee schedule).” The CMS proposal also recommends removing physician-administered drugs from the update calculation, which CMS anticipates would minimize payment reductions over the long term. This proposal would take effect in 2010. The rule also suggests several changes to the Physician Quality Reporting Initiative and the Electronic Prescribing Incentive Program, such as including a group reporting option and allowing data submission from electronic health records. A Fact Sheet providing more information about the e-Prescribing Program and Physician Quality Reporting Initiative proposals can be found at: www.cms.hhs.gov/apps/media/fact_sheets.asp.