Low Medicare pay for doctors puts health reform at risk

By Michael A. Newman
Saturday, June 19, 2010

Now is not the time for Congress to be penny-wise and pound-foolish.

The Senate on Friday passed the annual "doc fix" -- but this short-term stay on the reimbursement rates for physicians who treat Medicare patients does not resolve the underlying problem: Those reimbursements are woefully below market. And if Congress does not address this, the much-heralded health-care reform is at risk.

The reform legislation passed in March will greatly increase demand for physicians' services. But each year, more doctors are declining to participate in Medicare. Physicians, especially those providing primary care, are reimbursed by Medicare at rates 25 to 35 percent below those of other insurance programs. And the Senate action Friday came too late to prevent the already-low rates from being cut 21 percent. A definitive solution is needed, soon, to keep physicians on board for reform.

In recent years, both health-care utilization and costs have exploded. But an American Medical Association online survey last month of more than 9,000 physicians found that 31 percent of primary care physicians -- defined as family practice, general practice, internal medicine and obstetrics/gynecology -- restrict the number of Medicare patients in their practice, mostly because they consider reimbursement rates too low and have concerns about future payment cuts. The AMA found that 60 percent of all physicians are considering opting out of Medicare. And older physicians who have more Medicare patients in their practices have been retiring earlier than expected. (This trend may be held in check because of the economic downturn's effects on physicians' 401(k) plans.)

Since 1992, the Omnibus Budget Reconciliation Act has used a complicated formula to set the basis for physician reimbursement. The formula sought to reflect three major components of care: physician work, practice expenses and malpractice insurance premiums. These components were to be adjusted for regional cost variations. Even when the legislation was passed, it was understood that the initial methodology was limited and refinements to address inequities would be needed over time.

The data on which annual adjustments are made are not current, do not reflect geographic variation and do not consider the appropriateness of the care provided, which is key to getting the most bang for every health-care buck. Each year, reimbursement levels fall further below the real costs of caring for patients and below reimbursement rates from non-Medicare insurance programs.

The bottom line is that physicians have been underpaid by Medicare for almost two decades. A further 21 percent reduction will make it prohibitive for many physicians -- internists, geriatricians and family practitioners in particular -- to continue caring for their Medicare patients. Congress's annual moves to postpone further cuts in reimbursement amount to budgetary cosmetics that convince no one of the system's soundness. The "doc fixes" are a disincentive to physician participation in Medicare.

True, the problem is not just Medicare. Physician reimbursement from all insurers should be reviewed. Studies submitted to the Medicare Payment Advisory Commission show that cardiologists, radiologists, oncologists and other specialists are reimbursed at levels two to three times higher than internists, geriatricians, family practitioners, psychiatrists and other "non-procedure" physicians. But not addressing the Medicare cuts is a recipe for disaster.

Congress does have options to prevent the situation from worsening as reforms are made to the system. The Congressional Budget Office estimates that a 10-year freeze in the reimbursement formula, at least preventing further cutbacks, would cost $276 billion. Lawmakers who are loath to vote for these funds in a down economy are not thinking about the long-term picture.

Physicians appreciate the need to provide better value for every dollar spent on health care, to practice in more efficient arrangements, to use better information systems, and to do what is medically appropriate for each patient based on evidence and on each patient's needs. In more than 30 years I have not met a colleague who became a physician for financial reward. The challenge and satisfaction of medicine is in the development and application of knowledge, techniques and skill to enable our patients to have the best quality of life whatever their circumstances.

President Obama has been clear that he will to do what is needed to "bend the curve" of rising health-care costs and put the budget on a more sustainable path. It's commendable that he also said, "I'm not willing to do that by punishing hardworking physicians or millions of Americans who count on Medicare. That's just wrong."

Fixing Medicare is more than sensible: It is necessary so people in the program can continue to see their physicians, new Medicare patients will be accepted and physicians will be fairly compensated. This issue is the huge first step to reforming our health-care system. Yes, it will be challenging. It will be contentious. But we need a system that will lead to better value and better care for all Americans. Physicians, Congress and health policy should work together to address this immediately.

The writer is a physician practicing in Washington and a clinical professor of medicine at George Washington University School of Medicine.

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