Monday, March 01, 2010

The Implications of Our (Temporary) 21% Medicare Pay Cut

What we're learning from the 21% Medicare pay cut to physicians that occurred today:
  • There really must be a cost-control crisis with Medicare and the only politically-acceptable way to implement those cost controls are by cutting working physicians' payments.

  • There’s was widespread political support for blocking the scheduled pay cuts to doctors, but central government control moves very slowly. That's because doing so is expensive. For now, doctors have been asked to hold on to our billings for about 10 days so they can put through another temporary patch that will further delay the cuts until October 1 (pg 107) as part of a jobs bill, paid for by stimulus funds.

  • If they are serious about not cutting physicians' payments, Congress must get rid of the sustainable growth rate formula that keeps calling for the cuts and acknowledge that the country is going to be on the hook for billions of dollars in additional Medicare costs. Right now, that's not sounding too popular. Better to stand by your plan and not mention these additional costs to the nation.

  • We also see that Congress will not commit to fiscal conservancy when it is politically ill-advised to do so. Recall that the Sustainable Growth Rate (SGR) formula, part of the Balanced Budget Act of 1997 was enacted on August 5, 1997 to replace the Medicare Volume Performance Standard (MVPS). Section 1848(f)(2) of the Act specified the formula for establishing yearly SGR targets for physicians' services under Medicare and was intended to control the growth in aggregate Medicare expenditures for physicians' services. Since this formula to control Medicare costs is very likely to now be overturned, what does this say about other well-intentioned but politically unpopular policy initiatives planned to save costs in years ahead?

  • Policy decisions run by a single central body affect the entire United States and not just a portion of it. Sweeping legislation that affects the entire United States carries high risks to the nation as a whole if initial planning assumptions are incorrect.

  • As mentioned by others today, new primary care doctors are avoiding government healthcare because it cannot cover their costs. Even large institutions like Mayo clinic have done the math and aren't taking Medicare patients at some of their primary care sites. As others follow suit, this will put further strain on primary care physician availability.
Of course, now that the physician cost cuts are underway, maybe we should just stay the course and see what happens.

As crazy as that might sound, I bet it would ultimately give us some real change we could believe in.

-Wes

17 comments:

ray said...

What a mess! Obviously they will fix this more time like before. The AMA with it's opaque dealings and playing favorites screwed cognitive medicine. Congress with it's ridiculous ego is killing whatever little autonomy is left. Physicians should stand up and show leadership, otherwise the mess gets worse. Only physicians know where waste can be removed and over treatments can be curbed, they need to propose these proactively. They have to fight for tort reform fiercely. Sadly none of the medical societies has shown true leadership, so how can we except anything from congress???

The Happy Hospitalist said...

I agree. Let the cuts stand and see what happens.

Keith said...

Wes,

We all know this is only temporary while congress wrestles with getting the helath care bill through. In fact another patch was held up by a single Seantor who wanted to know shere the money was going to come from for restoring the present rates to physicians. Too bad he didn't ask the same questions when they passed the Medicare drug benefit plan a few years back with no extra revenue to pay for this entitlement.

Physicians have had control over waste for a long time and look how well they have performed. Until incentives are aligned to discourage overtesting and inappropriate office visits other interventions, we will continue to get excessive waste of resources. If physicians have largely contributed to the problem, how can anyone trust them to be part of the solution? I watch as medical institutions race to adopt the most new technology, whether it is proven or unproven to work, and specialists who are more than willing to use this new technology since they are often richly rewarded for being on the cutting edge. But are we getting value for this behavior? I am very skeptical this is the case.

Steve Parker, M.D. said...

So you're in favor of the pay cuts, Wes?

If they stand for a few months, many physicians will stop seeing Medicare patients. Emergency Departments will be flooded. The the patients themselves will start complaining to the polititians.

Thirty million Medicare patients have more influence than 700,000 physicians.

Will the Democrats use the "crisis" to enlarge government and reduce liberty even further?

Could get interesting.

-Steve

Anonymous said...

Dr. Wes,

The senator that Keith mentions, is Bunning, Republican, from KY. His block also denies an extension of unemployment benefits. And stops a bunch of jobs. Even the Repubs don't like him.

Anonymous said...

It's amazing how shocked physicians are that their pay would ever be cut. They're almost like federal employees in that way. Did you think that once you got on the govt. gravy train it would never end?

beetles said...

Anon 3:46

Who is surprised? This cut was programmed in for years, and everyone knew that each time Congress deferred a programmed cut, it had the effect of doubling down the previously planned reduction at the next interval.

Be careful what you wish for, though. Because for many practices, a 21% Medicare and Tricare cut will mean no more new appointments for patients with either of those plans. And because many practices will see a fall in gross receipts, operations expenses will have to be cut. The first place will be in the expensive but until now, necessary, personnel to do billing and coding and posting. It would be far less expensive to require all patients to pay cash at the visit and to make patients do their own dealing with Medicare or their insurers. So the end result for many patients, at least in primary care settings, is that no insurances of any kind would be accepted. Either you pay cash or move along elsewhere, wherever that "elsewhere" happens to be.

Anonymous said...

Doc in Or

Well, Anonymous, I knew someone would bring up the doctors-make-too-much-money mantra.

It's good old-fashioned capitalism that the only folks worthy of making money are the banksters and war profiteers. Perish the thought of a twenty-year-old, two-physician, seven-staff office being solvent(and that's all we ever desired to be), in rural Oregon, paying their devoted employees family wages, and contributing to what's left of this dying community. We are among the very few practices who accept Tricare in this Coast Guard base town.

As of today, we are limiting our patients to "one problem per visit", and are requiring face to face contact for all prescription requests, paperwork fill-outs, etc. Unlike lawyers, doctors don't get paid for phone calls and correspondence. If the 21% cut stands, we'll be laying off two employees. Maybe they can get jobs at the new Walmart that'll be opening within the next few months, or the recently opened Home Depot. And there's always McDonald's and Burger King.

Sad what America's become.

Amega Global said...

Why can't we just let the cuts stand and then see what will happens. I agree in the pay cuts btw.

Anonymous said...

It's amazing how shocked physicians are that their pay would ever be cut. They're almost like federal employees in that way. Did you think that once you got on the govt. gravy train it would never end?

The "government gravy train" before the cuts paid only 80% of actual cost to care for the patient, with the cut it is a larger red-line item to care for a patient. One may wish to consider those in medicine their servants, however, while the government can simply "adjust" reimbursement and pay a doctor less, s/he can't turn around and reduce his/her overhead by telling landlord they'll pay 21% less rent, tell suppliers they'll pay 21% less or tell staff everyone gets 21% less!

CriticalCareRN said...

For anybody unfamiliar with the real numbers when it comes to physician reimbursements from the government and health care inflation (the Medicare Economics Index), you should go to the actual source:

The Centers for Medicare and Medicaid Services (CMS) report shows that the Medicare Economics Index between 1992 and 2010, with the cuts, shows a 54% rise in the MEI and only an 11% rise in physician payment updates. Minus the recent cuts, they were already under water with inflation/reimbursements.

Here is the website.

http://www.hhs-stat.net/scripts/orgurl.cfm?orgabb=CMS-OA

Document titled: sgr2010p.pdf Table 8, page 6.

CMS defines the MEI as this:

"The MEI is a measure of inflation faced by physicians with respect to their practice costs and general wage levels. The MEI includes a bundle of inputs used in furnishing physicians’ services such as physician’s own time, non-physician employees’ compensation, rents, medical equipment, etc"

I have $42,000 of nursing school debt, and critical care nursing is intense, stressful, and a lot of work mentally, emotionally, spiritually, and physically. Nurse burn-out is a problem that is not getting better. Cut our income a lot, and lay us off, and forget about nursing recruitment and retention.

-Jodi

CriticalCareRN said...

Keith - I'm not a fan of one particular party, but you should be slow to blame Republicans for a massive expansion of an entitlement via the prescription drug plan.

CNN News article, May 2002:

- Democrats argue GOP prescription drug plan too weak, not expansive enough. Democrats propose prescription drug bill that costs an estimated $75 billion dollars more than GOP bill. -

Link below:

http://www.edition.cnn.com/2002/ALLPOLITICS/05/11/democrats.radio/

The Democrats wanted a MORE expensive prescription drug bill, and they didn't appear to be concerned then about PAYGO for it.

And, it's hard to stomach people pointing their fingers at Republicans for expanding entitlements when the Democrats are currently pushing for massive expansion of entitlements. The senate bill:

From letter by Richard S. Foster, Chief Actuary for Centers for Medicare and Medicaid Services. Dec. 10, 2009 regarding Senate Health care bill:

"Of the additional 33 million people who are estimated to be insured in 2019 as a result of the PPACA, a little more than one-half (18 million) would receive Medicaid coverage due to the expansion of eligibility to those adults under 133 percent of the FPL. "

"An estimated 28 million Exchange enrollees (80 percent) would receive these Federal premium subsidies"

"However, a number of workers who currently have employer coverage would likely become enrolled in the expanded Medicaid program or receive subsidized coverage through the Exchanges. For example, some smaller employers would be inclined to terminate their existing coverage, and companies with low average salaries might find it to their—and their employees’—advantage to end their plans, thereby allowing their workers to qualify for heavily subsidized coverage through the Exchanges."

Surely if you are against expanding entitlements, then you would be against the senate bill.

If you're not against expanding entitlements, I wonder how that can be?

The Congressional Budget Office:

"The country faces a fundamental disconnect between the services the people expect the government to provide...and the tax revenues that people are willing to send to the government to finance those services. That fundamental disconnect will have to be addressed in some way if the budget is to be placed on a sustainable course."

We have a 13+ trillion dollar debt, unfunded liabilities ALREADY we cannot afford, on the brink of baby boomer retirements (less people working and sending funds to government), and in our lifetime will be paying more on interest for our debt than we do for many of our big ticket domestic items.

Obama in State of the Union:

"Now, let me repeat: We cut taxes for 95% of American families..."

We can tax the hell out of the wealthy, and we still cannot afford to pay for what we ALREADY have.

I applaud Senator Bunning, even if he is a hypocrite. Someone has to start being fiscally responsible in Washington. Americans won't like the response from providers, and it will be a mess for our health care system, but I think they'll know who to blame for it?

-Jodi

CriticalCareRN said...

Obama yesterday: "And the rising cost of Medicare and Medicaid will sink our government deeper and deeper into debt."


From letter by Richard S. Foster, Chief Actuary for Centers for Medicare and Medicaid Services. Dec. 10, 2009 regarding Senate Health care bill:

"Of the additional 33 million people who are estimated to be insured in 2019 as a result of the PPACA, a little more than one-half (18 million) would receive Medicaid coverage due to the expansion of eligibility to those adults under 133 percent of the FPL. "

Link to that information (pages 6, 7)

http://www.samhsa.gov/Financing/post/Estimated-Financial-Effects-of-the-Patient-Protection-and-Affordable-Care-Act-of-2009-as-Proposed-by-the-Senate-Majority-Leader-on-November-18-2009.aspx

-
February 22, 2010

"States Put Medicaid on Life Support as Budgets Fall Short"

Link:

http://www.thefiscaltimes.com/Issues/Health-Care/2010/02/22/States-Put-Medicaid-on-Life-Support-as-Budgets-Fall-Short.aspx

Congressional Budget Office:

"The country faces a fundamental disconnect between the services the people expect the government to provide...and the tax revenues that people are willing to send to the government to finance those services. That fundamental disconnect will have to be addressed in some way if the budget is to be placed on a sustainable course."

Obama in State of the Union:

"Let me repeat. We cut taxes. We cut taxes for 95% of working families."

Congressional Budget Office on ways Medicare/Medicaid is cut in Senate bill:

"Reducing Medicaid and Medicare payments to hospitals that serve a large number of low-income patients, known as disproportionate share hospitals (DSH), by about $43 billion—composed of roughly $19 billion from Medicaid and $24 billion from Medicare DSH payments."

December 1, 2009 - Boston Herald

"Some three years after Massachusetts’ ambitious health-care reform effort required all residents to have health insurance, the hospitals that serve the state’s poorest residents say the state’s below-market reimbursement rates are pushing them to the brink of financial ruin."

Link:

http://bostonherald.com/jobfind/news/healthcare/view/20091201six_hospitals_to_sue_state_over_reimbursement_rates/srvc=home&position=also

Continued below....

CriticalCareRN said...

Congressional Budget Office on Medicare "savings" from senate bill:

"It is unclear whether such a reduction in the growth rate could be achieved, and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care."

CBO link:

http://cboblog.cbo.gov/?cat=5


Congressional Budget Office:

"As shown in the following table, CBO estimates that if the federal government paid all of the costs of covering newly eligible Medicaid enrollees for all states through 2019, net SPENDING WOULD INCREASE by about $35 billion over the 2010-2019 period relative to spending under H.R. 3590 as passed by the Senate."

Congressional Budget Office:

"You also asked how such a change in the amount of federal assistance to states would affect the federal budgetary commitment to health care. The federal budgetary commitment to health care—a term CBO uses to describe the sum of net FEDERAL OUTLAYS for health programs and tax preferences for health care—would ALSO INCREASE by about $35 billion between 2010 and 2019 if all states received the same level of federal assistance for Medicaid as Nebraska.”

-Jodi

DrLemmon said...

Here is how to fix Medicare's financial problems:

1. Cut benefits (physician's pay is part of this).
2. Expand the tax base (raise taxes or tax more people).
3. Raise the age of eligibility.
4. A combination of all three.

Anything else like P4P, quality initiatives, medical homes, Accountable Care Organizations etc. is one of the above in disguise. Think about it. Nothing else can be done.

Jodi said...

Dr. Lemmon,

Here are some pieces from the Congressional Budget Offices report on Paul Ryan's proposal "Roadmap to America's Future Act". He addresses all three entitlements, and the budget/economy:

"The lower budget deficits under your proposal would result in much less federal debt than under the alternative fiscal scenario and thereby a much more favorable macro-economic outlook. In addition to evaluating the effects of the proposal on Social Security, Medicare, Medicaid, budget deficits, and government debt, CBO also examined how the smaller deficits produced by the proposal would affect the economy,
assuming that such effects would play out as they have in the past."

"Under the Roadmap, the ratio of government debt held by the public to economic output (the ratio of debt to GDP) would be lower than that under the alternative fiscal scenario in every year (see Figure1)."

"The Roadmap, in the form that CBO analyzed, would result in less federal spending for Medicare and Medicaid as well as lower tax revenues than projected under CBO’s
alternative fiscal scenario."

Medicare

"People who are age 65 or older in 2020 and other existing enrollees at that time would continue to be covered by the current program, although some higher-income enrollees would pay higher premiums, and some program payments would be reduced.

The age of eligibility for Medicare would increase incrementally from 65 (for people born before 1956), as it is under current law, to 69 years and 6 months for people born in 2022 and later. Starting in 2021, new enrollees would no longer receive coverage through the current program but, instead, would be given a voucher with which to purchase private health insurance.

• In 2021, when enrollees would first receive the voucher, the average voucher for 65-year-olds would be worth $5,900 (in 2010 dollars), as specified by your staff.

• The voucher would be adjusted to reflect the age and health status of enrollees. If all Medicare beneficiaries (including older people with higher average expenditures) were to receive a voucher in 2021, the average voucher amount would be $11,000 (in 2010 dollars).

The amounts of the Medicare voucher, the subsidy for low-income Medicare beneficiaries, the federal funding for Medicaid, and the tax credit for the purchase of health insurance would all be indexed to grow at a rate halfway between the general inflation rate, as measured by the consumer price index for all urban consumers (CPI-U), and the rate of price inflation for medical care, as measured by the consumer price index for medical care (CPI-M). Using that blended rate, CBO estimates that those amounts would increase at an average annual rate of 2.7 percent for the next 75 years, in comparison with the average annual growth rate of nearly 5 percent that CBO expects for per capita national spending for health care under current law."

Jodi said...

Dr. Lemmon,

Here are some pieces from the Congressional Budget Offices report on Paul Ryan's proposal "Roadmap to America's Future Act". He addresses all three entitlements, and the budget/economy:

"The lower budget deficits under your proposal would result in much less federal debt than under the alternative fiscal scenario and thereby a much more favorable macro-economic outlook. In addition to evaluating the effects of the proposal on Social Security, Medicare, Medicaid, budget deficits, and government debt, CBO also examined how the smaller deficits produced by the proposal would affect the economy, assuming that such effects would play out as they have in the past."

"Under the Roadmap, the ratio of government debt held by the public to economic output (the ratio of debt to GDP) would be lower than that under the alternative fiscal scenario in every year (see Figure1)."

"The Roadmap, in the form that CBO analyzed, would result in less federal spending for Medicare and Medicaid as well as lower tax revenues than projected under CBO’s alternative fiscal scenario."

Medicare

"People who are age 65 or older in 2020 and other existing enrollees at that time would continue to be covered by the current program, although some higher-income enrollees would pay higher premiums, and some program payments would be reduced.

The age of eligibility for Medicare would increase incrementally from 65 (for people born before 1956), as it is under current law, to 69 years and 6 months for people born in 2022 and later. Starting in 2021, new enrollees would no longer receive coverage through the current program but, instead, would be given a voucher with which to purchase private health insurance.

• In 2021, when enrollees would first receive the voucher, the average voucher for 65-year-olds would be worth $5,900 (in 2010 dollars), as specified by your staff.

• The voucher would be adjusted to reflect the age and health status of enrollees. If all Medicare beneficiaries (including older people with higher average expenditures) were to receive a voucher in 2021, the average voucher amount would be $11,000 (in 2010 dollars).

The amounts of the Medicare voucher, the subsidy for low-income Medicare beneficiaries, the federal funding for Medicaid, and the tax credit for the purchase of health insurance would all be indexed to grow at a rate halfway between the general inflation rate, as measured by the consumer price index for all urban consumers (CPI-U), and the rate of price inflation for medical care, as measured by the consumer price index for medical care (CPI-M). Using that blended rate, CBO estimates that those amounts would increase at an average annual rate of 2.7 percent for the next 75 years, in comparison with the average annual growth rate of nearly 5 percent that CBO expects for per capita national spending for health care under current law."

It's an interesting read.

- Jodi