PHYSICIANS/POLICY/POLITICS: Is cutting Medicare Part B fees a good thing? by Eric Novack

THCB’s favorite orthopedic surgeon Eric Novack is grumpy about Medicare’s proposed cuts in physician reimbursement, which are still up in the air as I write. Not sure how much support he’ll get over here on THCB, but it’s ironic that $10 billion is being set aside for health plans and PBMs to reimburse them for possible losses for their role in Medicare Part D, and hospitals are getting a raise. If we are going to cut Medicare, wouldn’t an across the board cut be fairer? Here’s Eric’s thoughts:
Unless Congress acts in the next week, reimbursement to physicians for services provided to Medicare recipients will be cut by 4.4%. The government’s formula for determining the payment rate does not take into account the increasing costs of healthcare delivery. Rather it is based upon such factors as the cost of prescription drugs and general economic factors over which doctors have no control. The reduction is not merely a reduction in the rate of growth of spending. Payments of $100 will become $95.50. And if the Congress’s inaction continues, payment will be less than $75 by 2011. No adjustments for inflation or cost of living are included.
Is all Medicare spending being cut? No, only payments for outpatient services- Medicare Part B- are affected.
Hospital care, paid under Medicare Part A, will get a pay increase of about 4.8%. Managed care plans that get paid by Medicare for managing Medicare HMOs will also get a raise. In both cases, the government’s formula for payment is based upon the medical economic index, which takes into account the costs of health care delivery.
Other than doctors, why should anyone care that reimbursement is going down? What options do patients and physicians have? Doesn’t more affordable mean more accessible?
Nearly 97% of US doctors participate in Medicare. This means that the doctor has signed a contract to accept the rates that the government says it is willing to pay for services. Doctors cannot be selective. They must accept the rate for any and all services that Medicare offers. They cannot tell patients that they will accept the contracted rate for one service, but not another. For example, doctors are not allowed to accept the Medicare rate for knee replacements, but not for hip replacements. This is especially an issue when it comes to the care of very complex conditions, as the level of expertise, time necessary, and potential liability is significantly increased, whereas payment is often only minimally higher than for the care of much simpler cases.
Physicians have several ways to deal with the Medicare cuts. They can retire and stop practicing medicine. Some will. They can see more patients each day, spending less time with each patient. Some will. They can stop practicing medicine and pursue other careers. Some will. They can limit the number of new Medicare patients they will see. Some will. They can drop out of Medicare altogether, requiring Medicare patients to pay completely out of pocket for healthcare services. Some will.
Patients have few, if any, options under the current structure of Medicare. Seniors cannot opt out of Medicare and find private insurance to cover care.
Government fixing of healthcare prices below reasonable market rates will create the medical equivalent of the gasoline crisis of a generation ago. The planned and projected Medicare cuts will have exactly the opposite of the intended effect: seniors throughout the United States will have less access to doctors and healthcare services.

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15 replies »

  1. Same song – next verse! Attacking Part B costs including physician reimbursement is always the solution to rising Medicare spending. The rapid growth of outpatient expenditure gets their attention. This growth didn’t come from the doctor’s office, it happened because the hospitals pushed so much volume to the outpatient side during the 1980’s and 1990’s in an attempt to continue higher levels of reimbursements for outpatient care while maximizing profit on inpatient care. IF the AMA lobbied with the same strength as the AHA more attention would be paid to cutting costs where the real waste occurs – in the hospitals – not in the doctors offices. On a prorata basis, if the doctor’s office had the administrative overhead of a hospital all doctors would already be out of business. However, the solution to this is difficult – it would require physicians banding together to defend themselves. Haven’t seen that happen yet! Mike

  2. I think doing cash only business as a physician is a slipperly slope. Although dealing with Medicare and Medicaid can’t be frustrating, it’s a necessary evil in today’s society.

  3. The Medicare Allowed Charge which is “accepted” by MDs under “assignment” is price control. All price control fails to take into account market forces. As a result the MAC will more and more pay less than the actual cost of the care given. This will cause the retirements and other behavior changes feared. Access to care will be affected adversely.
    Is this a plan? Decrease access, get the now pampered masses complaining, and then jump in and offer true socialized medicine – where no one will get adequate care but a whole lot of power will be gained by the government – as the answer?

  4. For the doctors out there; I’m starting med school in August, and I’ve heard about physicians who do business on a cash-only basis so that they save the cost of paying someone to interpret the insurance rules and paperwork…
    Is there any site with information on such things? Being that I’m in rural Georgia, and plan on practicing in a rural environment, I’ve been giving the idea some thought. Anyone with helpful advice or who can point me towards some, please email me.

  5. Surgeons need to really reflect and decide if taking insurance and medicare really is worthwhile anymore. It is probably time now to bite the bullet and drop participation in medicare and all other insurance and just take cash. Insurance companies would be forced to accomadate. It was a grand mistake 15-20yrs ago to start accepting insurance. Surgeons fees nowadays are less than 10% of the total cost of a hospitalization anyways.

  6. Finally,
    Someone above chimes in with the ACROSS THE BOARD ISSUE. This is not just a MEDICARE issue. For the last 10 years or more private insurers (commercial) have based their reimbursements on the MEDICARE standard. There is virtually NO insurance payer that pays “reasonable and customary” charges anymore. When Medicare drops, ALL INSURANCE REIMBURSEMENT DROPS, NOT JUST MEDICARE! So even if you don’t accept Medicare, what Medicare does affects you and it is across all specialties even those who usually see and treat younger individuals. This is an issue that dropping out won’t solve, so if you can’t practice on an “all cash basis” then you need to “make a big fuss” with your representatives, societies AND patients.
    R. Woody MD

  7. I appreciate the positive feedback. In spite of Matthew’s pessimism, some might say cynicism about the topic, it happens to be generally true that people feel doctors (and other healthcare professionals) ought to be apppropriately compensated for the work we do.
    The current road we are on to progressive governmental control will lead to an access crisis (some might say it is here- just call your local emergency rooms and see if they have surgical specialists or nursing specialists available) as well as the turning of patients against patients as special interest groups toss more and more money into lobbying to get their problem funded. This is money that could go toward paying for healthcare, supporting research, or any personal use.

  8. Medicare cuts to physician fees are just the tip of the iceberg. I was stunned 2 years ago to find out that my high-priced private insurance bases their reimbursement fees on the Medicare rate. They paid my surgeon less than Medicare paid for the same surgery 10 years ago. When I questioned my surgeon about it, she said that mine was actually one of the better payors. Some private insurance pays less than the current Medicare rate. Yet even before I ever used my insurance, my rates typically go up 30% or so per year. Either way — as Medicare rates go, so goes payment by private insurance. The impact on physicians, and ultimately patients, is staggering.
    The more I have learned, the angrier I have become. Not only is this about patient access, it is also about patient safety and physician well-being. But on every level, it is about justice and ethical relationship. No wonder physicians feel betrayed and patients are dissatisfied.
    A big problem is that patients don’t know what goes on with reimbursement, even private insurance reimbursement, and what the Medicare cuts really mean. I certainly didn’t, even though I know many doctors personally.
    We really need to educate patients and become better partners in changing unethical relationships in healthcare — starting with insurance.

  9. I believe physicians will turn to retirement, other professions or simply not participate in Medicare. I believe the poor, uninsured and elderly will lose out on care provided by highly qualified physicians. This is an outrage. There are so many obstacles to practicing medicine; it is mindboggling. Why is it that the only health care provider getting the shaft is the physician? Why is Pharma, managed care and health care facilities getting most of the Medicare dollars and physicians are getting a cut in their reimbursement? Has anyone read the legislative history to the new Medicare regulations? If I have time, I will do so today.
    In addition to low (lousy) reimbursement rates, you have the antikickback statute and the stark physician self-referral law, as well as state physician self-referral laws to watch out for. Granted, there are some greedy physicians out there practicing medicine not for the sake of improving health and quality of life for patients; but out to make as much money as possible through business deals, kickbacks, etc. There are plenty of cases that show this ugly side of medicine. However, there are so many physicians that want to practice medicine lawfully and be comfortable in life. They want to make enough money to pay their student loans off, pay their overhead costs of running a practice, living expenses and family costs. With the rates given to physicians for reimbursement, I don’t know how a physician can survive in this climate.

  10. Dr Erick Novack,
    You keep saying that employees should know how much their health insurance costs. Yet, when you had your own HR person call for HSA health insurance quotes she didn’t know the cost of your present insurance. I should repeat the things that your HR person said, it was pathetic.
    Your current coverage on employees sucks and is dangerous. Your HR person comes right out and lies. I’m sorry Dr. Novack but your health insurance knowledge is pitiful. If you wish I will list the lies your HR person told me.

  11. You state: The planned and projected Medicare cuts will have exactly the opposite of the intended effect: seniors throughout the United States will have less access to doctors and healthcare services.
    It’s actually worse than that. Since some physicians will retire earlier than they would have otherwise, and since some will turn to other better careers, and since still others will decide not to enter the field in the first place, everyone will have less access to doctors and healthcare services. We might also speculate that the doctors who can retire early were successful and perhaps also good doctors, that the docs who can turn to other careers are the brightest ones who can easily transition to another field without significant downtime, and that the ones who go elsewhere are also the brightest and most capable of turning to other possibilities. If this speculation is true, then not only will we lose access to healthcare, but we will likely lose access to the highest quality of healthcare.
    My practice is simple: I don’t take insurance and don’t participate in Medicare. I’ve never turned a patient away, however. I can simply charge less since I don’t have to maintain the office staff and paperwork necessary otherwise. My charge for a brief medication check is often identical to what the patient’s copay would have been otherwise. (I’m more rigid with patients who smoke – if they can afford $150/month for cigarettes, they can afford reasonable consultation fees).
    I’m the first to admit that my surgical colleagues are in a more difficult position, but there are solutions to this growing problem in many medical specialties that have not yet been explored.

  12. Social Security’s problems are trivial compared to Medicare. Medicare is already paying out more than it collects, and that will only get much worse, and very soon. We’ve simply promised too much to too many beneficiaries. It’s ‘interesting’ to watch the medical and retirement systems collapse. I guess History is trying to tell us pay-as-you-go medical and retirement programs in the government and private sector just don’t work.

  13. No, the reduced access is the point. But, the polies just can’t say that to their constituents, so they create an emergent system that destroys the system, their goal.
    They want to get out of this entire business. They want to get out of providing any social services at all. Their real constitutents, the ones that fund campaigns, already have a healthcare system that works. They can afford to pay cash and their doctors only take cash. There will be a two-tier system in all things soon enough. Up or down, get out of the middle class. But, by all means keep voting for the polies while they choke you.

  14. Is there a law that says medicare recipients can’t drop out and opt for private insurance, or is that there is no private insurance available?