Myths & Facts about Health Care Reform: Doctors Who Take Medicare

MYTH #1:  Reform legislation calls for a 21% cut in Medicare payments to physicians.

FACT:  First, the 21% cut has nothing to do with reform legislation. Secondly, it is never going to happen.

Back in 1997 Congress passed legislation which said that if Medicare spending on physicians exceeds a complicated “Sustainable Growth Rate” (SGR) formula in a given year, Medicare fees to all doctors would be trimmed the next year. Since then, Congress actually followed the SGR formula only once. Every other year, it postponed the cuts until the following year—which is why the accumulated postponed cuts now exceed 22%.

The SGR rule was, from the beginning, a crude solution to health-care inflation. We don’t want to whack all doctors’ fees across the board. Any adjustments should be made with a scalpel, not an axe. We know that Medicare pays some doctors (primary care docs, gerontologists, palliative care specialists and general surgeons) too little while overpaying some specialists for certain services.

As I have explained here the Medicare payment schedule is regularly updated by a committee composed mainly of specialists who meet behind closed doors. Not surprisingly, they believe that their time is worth far more than the 30 minutes a primary care doctor might spend talking to a patient about quitting smoking. Thus, the gap between payment for primary care services and specialists’ services has continued to widen. 

The Medicare Payment Advisory Commission (MedPAC) has recommended that the payment schedule be readjusted with an eye to how much benefit the patient derives from the service. MedPAC also suggests targeting particularly lucrative procedures in cases where high fees may encourage overtreatment.  For example, fees for certain diagnostic tests are generous enough that some doctors have begun leasing or buying very expensive diagnostic testing equipment for their offices.  The equipment can easily cost more than a million. Research shows that these doctors then recommend twice as many tests in order to recoup the capital investment.

Meanwhile, from 2000 to 2006 Medicare spending on diagnostic imaging doubled from $7 billion to $14 billion—without any clear benefit to patients. To the contrary, we know that unneeded tests may expose patients to the dangers of excess radiation-- or the risk of false positives which can lead to unnecessary treatments.

Reform legislation addresses the problem. This year, Medicare will assume that diagnostic testing equipment in a physicians’ office is being used 65% of the time –up from 50% of the time. As of January 1, 2013, Medicare will base payments on the assumption that doctors are using the equipment 75% of the time.  Since this metric determines how much doctors need to be paid to cover the cost of the equipment, the change will lead to lower reimbursements per test.  According to the Congressional Budget Office, Medicare will save $1.9 billion over ten years.

Given lower reimbursements, it is likely that in the future, many fewer doctors will buy or rent the equipment for their offices. This will help rein in health care inflation: if pricey diagnostic equipment is found primarily in hospitals or radiology centers where it is used close to 100% of the time, those who provide the testing service can afford to charge less per test, while still making a reasonable profit. 

In contrast to the SGR formula, which would try to save health care dollars by making blind, broad-based cuts, this is an intelligent, targeted change.

Why is the SGR formula still law? For years, Bush administration budgets assumed that Congress would enforce SGR cuts that year; this made the administration’s budget look leaner. But eventually most people in Washington understood that the SGR cuts were merely an accounting fiction. When President Obama took office, he did not include savings from SGR cuts in his initial budget. And he has proposed repealing the SGR law. The House has voted to do this.  But a fractured Senate has not yet voted to scrap the SGR formula. Instead, the Senate decided to postpone the 21% cut until October.  Meanwhile, House legislators left for vacation without voting on that extension. When Congress returns to work this week you’ll hear more about the SGR. Some commentators may pump up the story to create suspense, drama—and fear. But trust me, the SGR axe won’t fall.

Admittedly, it’s a little awkward for reform’s opponents to vote to repeal the SGR at this point in time--while simultaneously claiming that universal coverage will bankrupt the country.  It suggests that they have made a deal with the AMA. Meanwhile the physician’s guild will continue to raise the specter of devastating cuts in order to stir up the rank and file. And no doubt some physicians who never read newspapers and get their information from Fox News may actually believe that they are at risk. But informed Beltway watchers understand that the Draconian  formula will never be applied.  For more sane discussion of the topic see the Washington Post’s Ezra Klein and The New Republic’s Jonathan Chait elaborating  on why everyone agrees that the SGR cuts are a sham.

MYTH #2: Healthcare reform means that doctors will stop taking Medicare patients.

FACT:  This assertion is usually linked to the assumption that Medicare is going to slash all doctors’ fees by more than 20 percent. (See MYTH # 1). Instead, under the reform legislation Medicare will hike payments to many doctors. The AMA lists the increases:

•   10 percent incentive payments for primary care physicians. All physicians in family medicine, general internal medicine, geriatrics and pediatrics whose Medicare charges for office, nursing facility and home visits comprise at least 60 percent of their total Medicare charges will be eligible for a 10 percent bonus payment for these services from 2011–16.

•   10 percent incentive payments for general surgeons performing major surgery in areas where more health professionals are needed. All general surgeons who perform major procedures (with a 10- or 90-day global service period) in a health professional shortage area will be eligible for a 10 percent bonus payment for these services from 2011–16.

•    5 percent incentive payment for mental health services. In  2010, Medicare is boosting payment for psychotherapy services by 5 percent. 

•   Geographic payment differentials. In 2010 and 2011, Medicare will make a separate adjustment for the practice expense portion of physician payments that will benefit physicians in rural and low cost areas.

•   In 2013 and 2014 Medicaid payments to primary care physicians will be lifted to match Medicare rates. Today, Medicaid typically pays doctors 30% less than Medicare for the same service. The federal government is providing 100% of the funding needed for states to meet this requirement.

Why don’t we ever hear about the good news for doctors on Fox?  Because Fox  News is bent on spreading the canard that, thanks to reform, seniors will lose their doctors. The truth is that many physicians will see their incomes rise, beginning next year. Why would they possibly choose to stop taking Medicare patients just when Medicare fees are climbing?

Not only will many physicians profit from increases in Medicare and Medicaid payments, they also will benefit from an influx of formerly uninsured patients who, thanks to government subsidies and new regulations will be able to seek care.  Many of these patients will suffer from pre-existing conditions; others will be low-income Americans who may not have seen a doctor for some time.

As I noted in part 1 of this post, for insurers this is bad news. These could be very expensive customers. But under health care reform, health care providers will be the winners. The AMA estimates that physicians provided $24 billion in charity care in 2008, much of it to uninsured patients. Under reform, it’s less likely that doctors will be faced with patients who cannot pay, or who show up too late for effective treatment.

Allen Mondzac, an oncologist at the George Washington University Medical Center is enthusiastic. He recently told the Washington Post that he’s preparing for a "deluge" of new patients, "I hope I'll [be] seeing earlier stages of cancer,” added Mondzac, who specializes in brain tumors and breast cancer. That people will not be afraid to go to the doctor because of the expense and will get symptoms taken care of and looked into early."

In Part 3 of Myths & Facts, I’ll discuss how reform will affect Medicare benefits as well as the premiums and co-pays that Medicare patients pay. I’ll also talk about what is likely to happen to patients who are now on Medicare Advantage. In Part 4, I’ll take a close look at the impact that reform will have on hospitals

Comments

[Healthcare worker]

While I won't call you an idiot. You seem to have left out some important trends that are going in the US healthcare industry.
*Increased regulation and oversight, specifically from CMS, via the RAC program. Physician reimbursements, both current and previous, from Medicare are being reviewed for potential "take backs."
*More pre-authorization, pre-certification, and red tape for providers to complete prior to services being rendered. This needs to be done for expensive procedures like MRI and CT scans, but not every finger prick or joint injection.

While both of these trends are necessary, the simple fact is it increases costs and decreases efficiency, with the end result being unhappy physicians. There may be a net increase in revenue (for some providers), but there will certainly be a greater increase in costs...plus providers will have to fight to keep the reimbursements they receive.

Does this sound like doctors will be welcoming Medicare members with open arms?

BTW, you're not an idiot as the previous poster stated...you're just uninformed or completely biased.

[Steve Orr]

Thank you for the nice points. Hopefully we are going through health care reform version 1.0 and there are more changes ahead. Unfortunately there is a lot of misinformation about reform and the realities of how health care is actually implemented in the U.S. by our own people. Some points worth pondering below :

The last year of a patients life accounts for over $450 billion dollars per year in health care costs. So-called "last illness" is the big 450 pound gorilla in the room.

It is the patient's body and the patient's disease(s) that is responsible for all of these expenses. Most illnesses are either preventable or modifiable by the patient's choices and behaviors. Where is personal responsibility in the equation of health care reform?

The profit of a health care insurance company does not benefit the patient. Taxing excessive insurance company profits is a revenue source to fund indigent preventative care. There are other ways to re-package this.

More to follow.

[shannon]

I work in a doctor's office and due to these looming cuts I have to worry about my job. Currently over half the patients we see are Medicare. Due to these cuts people in our area with medicare may have to travel over an hour to see a dr as we are the only group in our area for a certain speciality. I know the dr's I work for dont want to do that. We give more discounts & work with people about payment plans than most office's. I know this from being a patient myself and being told i would have to reschedule my appointment if i didnt have my co-pay. The bottom line is most dr care about there patients and dont want to cut care because of money but if they dont i lose my job. So what do we do? I have tried to stay informed about our current healthcare situation because it directly effects me & my family but to hear such a one-sided version is rediculous even to me. Hope no one reads that garbage & believes it!!!!