With Medicare fees to doctors set to automatically decline by 10.6 percent on July 1, Congress is under considerable pressure to prevent this reduction and preserve beneficiaries’ access to medical services.

As expected, the centerpiece of the legislation would forestall the physician pay cut for 18 months and increase payments by 1.1 percent in 2009. A week ago, Baucus told physician groups they would get a 0.5 percent hike. Finance Committee ranking member Chuck Grassley (R-Iowa) then upped the ante in his competing proposal, which includes a 1.1 percent increase.

Baucus targets health insurance companies to cover the cost of the bill, expected to be about $20 billion.

The measure would tap a “stabilization fund” created in 2003 to entice plans to participate in Medicare and would eliminate extra money paid to Medicare Advantage plans that is supposed to pass through to teaching hospitals. According to Baucus and others, the hospitals already get special payments directly from Medicare. The bill also calls for new marketing restrictions on the plans.

The Bush administration has made clear it that the president would veto any Medicare bill that targets Medicare Advantage.

Although Grassley and some Senate Republicans have shown willingness to consider reductions in spending on the plans, few would be likely to back Baucus’s plan. Two Finance Committee Republicans, however, already have: Sens. Olympia Snowe (Maine) and Gordon Smith (Ore.).

The legislation contains numerous proposals not related to payments for physicians of health insurance plans. The bill would create financial incentives and penalties designed to encourage doctors to use electronic prescriptions, extend rural healthcare programs, and require Medicare Part D prescription drug plans to pay pharmacies more quickly for the drugs they dispense to beneficiaries.