Reimbursement Runaround Redux

Lawmakers Continue to Struggle with Doc Fix

Temporarily delaying mandated reimbursement cuts for physicians providing Medicare services has become a routine and recurring event in the US Congress. Since 2002, lawmakers have repeatedly passed legislative stopgaps to forestall reductions in the Medicare Physician Fee Schedule (MPFS) mandated by Medicare’s Sustainable Growth Rate (SGR) formula, but some of the recently enacted pay patches have lasted little more than a month. While lawmakers procrastinate, frustrated doctors continue to advocate a permanent solution, often called the doc fix, which would repeal Medicare’s SGR formula and fix physician payments at stable or increasing rates.

Despite the comprehensive nature of recently enacted national healthcare reforms, changes to Medicare’s SGR formula did not make it into the final legislation. Instead, a 21.2% rate cut scheduled to go into effect for services paid under the MPFS on or after January 1, 2010, was replaced with a zero percent update until March 1 by a provision in the Defense Appropriations Act of 2009, and again until April 1 by the Temporary Extension Act of 2010.

The Medicare physician payment cuts were previously delayed 7 other times over the last 7 years. Scheduled cuts of 4.4% in 2003 and 4.5% in 2004 were replaced with increases of 1.6% and 1.5%, respectively. In 2009, a scheduled 10.1% cut was replaced by a 6-month, 0.5% raise followed by an 18-month freeze. And in 2009 a scheduled 15% cut was replaced with a 1.1% rate increase.

At press time the most recent legislative reprieve for Medicare physicians was included in the Continuing Extension Act of 2010, which extended the zero percent MPFS rate update through May 31, 2010. Because the Continuing Extension Act was not enacted until April 15, 2 weeks after the previous extension had expired, the zero percent update was made retroactive to April 1; it was the second retroactive pay patch this year.

The Continuing Extension Act of 2010 also extended Consolidated Omnibus Budget Reconciliation Act health insurance subsidies, unemployment benefits, national flood insurance, and other expiring programs. In the statement released by the White House on passage of the bill, President Obama did not comment on the temporary postponement of Medicare pay cuts or proposals for a permanent solution.

After enactment of the Continuing Extension Act, the Centers for Medicare & Medicaid Services (CMS instructed Medicare contractors to begin processing claims under the new law for services provided by physicians, nonphysician practitioners, and others paid under the MPFS. Medicare held most claims with dates of service April 1 and later in anticipation of congressional action. If Congress had not acted, payment rates for these services by physicians, nonphysician practitioners, and others who are paid under the MPFS would have been reduced.

“The administration has repeatedly stated that the formula that determines what physicians and others are paid under the MPFS is broken and needs to be fixed. We will continue to work with Congress to find a long-term solution,” said Jonathan Blum, deputy administrator and director for CMS.

On April 12, AARP CEO A. Barry Rand sent a letter to every senator, urging them to rescind the 21% cut to Medicare’s reimbursement. In the letter, Mr. Rand told senators that “without prompt congressional action, Medicare beneficiaries are at risk of not getting the timely physician care they need to stay healthy and avoid more costly institutional care.”

The American Medical Association (AMA) has also called for an end to the cycle of delays and retroactive pay patches. AMA asserts that the longer Congress waits, the more expensive a solution will be and the more physicians will elect to limit the number of Medicare patients they see or stop treating them altogether.

According to an AMA Medicare physician payment advocacy document, Medicare rates have been flat over the last 8 years, while the cost of running a medical practice has increased by >20%. In the document, AMA notes that the leading edge of the baby boom generation will start enrolling in Medicare next year, with enrollment growing from 44 million in 2011 to 50 million by 2016.

The AMA also said that an informal poll of physicians found that 68% would limit the number of Medicare patients they care for if this year’s cut occurs. The cuts would come at a time when Medicare physician payment updates already lag behind increases in the costs of caring for seniors.

“Short-term patches of any length create instability in the Medicare system for seniors and their physicians and hurt healthcare access for patients,” said AMA President J. James Rohack, MD. “We urge Congress to seize this opportunity to fix the flawed payment formula before the June 1 deadline when this year’s 21% cut begins.

“It’s critical that Congress replace the flawed formula with one that better reflects the costs of providing 21st-century medical care,” Dr. Rohack continued. “It took until 2009 for Medicare physician payment rates to catch up to where they were in 2001, while the cost of caring for seniors has increased by more than 20%. Physicians cannot continue caring for all Medicare patients if Congress continues to enact temporary patches that freeze payments at 2001 rates.”

With the June 1 deadline for action on Medicare physician payment approaching, the AMA unveiled a new print advertisement aimed directly at lawmakers. Scheduled for publication in 3 Capitol Hill publications through the end of May, the ad asserts that more delays of a permanent solution will increase the cost for taxpayers and calls on Congress to fix the flawed Medicare physician payment formula now. It states that, “Every year that Congress fails to pass a permanent payment fix, the cost skyrockets.”

Based on assumptions made by the Congressional Budget Office (CBO), AMA projects that the cost of a doc fix will increase from $210 billion currently to $396 billion in 3 years and $513 billion in 5 years. AMA says the cost would have been $49 billion if Congress had acted in 2003.

A CMS fact sheet states that national health expenditures (NHEs) in the United States grew 4.4% to $2.3 trillion in 2008, or $7681 per person, and accounted for 16.2% of the gross domestic product. Medicare spending grew 8.6% to $469.2 billion in 2008, accounting for 20% of total NHEs. Medicare spending is projected to grow 8.1% in 2009 and average 6.9% growth per year from 2009 to 2019.

According to the CBO, the recently enacted healthcare laws reduce the growth rate of Medicare spending (per beneficiary, adjusting for overall inflation) from about 4% per year for the past 2 decades to about 2% per year for the next 2 decades. With more seniors reaching Medicare eligibility, it is unclear whether this reduction can be achieved if lawmakers enact a doc fix that keeps physician payments at current rates or provides the annual increases in reimbursement the AMA would prefer.

The American Academy of Family Physicians (AAFP) has said the absence of a permanent doc fix creates “a false economy,” but acknowledged the challenges lawmakers face when considering solutions in the context of unfavorable economic conditions and government deficits. Kevin Burke, director of the AAFP Division of Government Relations, said in April that “the physician payment extension has been caught up in much larger issues of unemployment insurance and the federal deficit. But while Congress is mired in its partisan battles, family physicians are faced with drastically reduced payments now and administrative nightmares in the near future.”

One of the sticking points in congressional debate on the doc fix is whether resulting increases in Medicare spending will be offset by reduced spending elsewhere or with tax increases. It is also unclear whether lawmakers are willing to take the unpopular step of following through on a Medicare physician pay cut or risk undermining the budget neutrality claims they have made about the comprehensive healthcare reform package.

The CBO estimates that freezing the SGR update at zero percent would cost $275.8 billion through 2020. The price of the doc fix would more than eliminate the $138 billion in federal deficit reduction that proponents of the recently passed national reforms claim will result from implementation of the new laws. CBO Director Douglas W. Elmendorf has repeatedly stated that estimates only apply to the laws as they are written and that the budgetary impact could be quite different if provisions are ultimately changed.—Charles Boersig