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The Medicare physician reimbursement ‘fix’

With the Senate’s passage of a bill preventing cuts to Medicare physician reimbursement for another six months, we’re only waiting on the House’s action to boot the problem further down the road, where it can grow, and fester and frustrate just in time for the New Year.
That said, it isn’t all bad news. The good news is the (short term) fix is paid for, it was the product of bipartisan action, and, for docs, it increases reimbursement by a touch above two percent.
With that said, this is so illuminating and so frustrating on so many levels, that it is worth exploring in detail.
First, the House may not pass the bill. Speaker Nancy Pelosi (D CA) has said that she’s got big problems with the narrow fix as it doesn’t address the House’s priorities in other areas including jobs and unemployment extension.
If the House doesn’t pass the fix early this week – like before Wednesday – expect physicians to go ballistic. CMS has already told their bill payers to start cutting checks to docs reflecting th 21% cut; each day that passes before those cuts are rescinded will increase the level of anger among physicians, which is already close to an all-time high.
Second, ‘fixing’ the current Medicare physician reimbursement price-setting process (known as the Sustainable Growth Rate (SGR) for the methodology in place today) will require Congress recognize a quarter-trillion dollar addition to the deficit.
Ouch. Hard to see how any politician will explain that to their constituents at a Town Meeting. Let me see, “Well, Mr X, in order to understand why I voted for a quarter trillion dollar addition to the deficit, let me explain how the SGR contributes to medical price inflation…” Can’t wait to see the headlines on FauxNews on that one…
Third, as I noted last month, “there’s an inherent problem with the SGR approach – SGR attempts to use price to control cost. The complete failure of the SGR approach to control cost is patently obvious, as utilization continues to grow at rapid rates. This was a problem four years ago, and its done nothing but get worse. Not only does the RBRVS/SGR approach contribute to cost growth, it also ‘values’ procedures – doing stuff to patients – more than listening to them.”
As Gail Wilensky wrote, “The primary problem with the SGR is that while it can control total spending by physicians (assuming it is actually implemented), it does not affect nor is it driven by the volume and intensity of spending of individual physicians. In fact, there is some concern that expenditure targets may actually exacerbate the incentives for individual physicians to increase the volume and intensity of services they provide.” [emphasis added]
Fourth, changes to Medicare physician reimbursement will impact group, Medicare Advantage, Medicaid managed care, and workers comp – both directly and indirectly. Many network contracts are based on or reference RBRVS, so changes to RBRVS can result in alterations in network reimbursement. The indirect impact may be more significant, as physicians alter practice and billing patterns to address revenue shortfalls and opportunities. With eventual cuts in reimbursement for surgeries and imaging likely, payers will have to carefully monitor practice patterns if they are to stay on top of potentially problematic trends.
Finally, Congress is indeed in a ‘fix’. Caught between the Scylla of budget deficits and Charybdis of an enraged and engaged physician community, it decided to prolong its agony until after the fall elections, in hopes that passage of a more permanent solution will come so early in the 2012 election cycle that other issues will overshadow it by the time the voters hit the booths in November 2012. That, and the Democrats may well be thinking they are going to lose a bunch of seats in both houses this fall, so any post-2010 election solution to SGR/RBRVS will require the Rs to make policy and not just hurl bricks. It’s one thing to point out problems, it is entirely another to come up with solutions, especially when any foreseeable solution will anger a powerful constituency.
What does this mean for you?
Watch what happens this week in the House. It will be a lesson in civics, if not civility.

One thought on “The Medicare physician reimbursement ‘fix’”

  1. Joe, As I recall, Dr.Wilensky advised the first President Bush on Medicare and Medicaid matters.Twenty years later, how she and the equally hapless economic expert (HMO concept champion) Dr. Uwe Reinhardt merit any credibility is mystifying. It would seem that any of their ideas have escalated the out of control costs of health care in the last two decades. The unintended consequence of reduced reimbursements to physicians/providers has been an increase in complexity, number, and types of exams performed. Self referral is a huge problem which payors and our gutless Congress have made no effort to stem. Paying more forinconclusive low tech histories and physicals isnt the answer either. Unnecessary and potentially damaging surgeries are also problematic. The average member of the public wants immediate access to any form of health care he or she desires. The average patient should personally pay more out of pocket for treatments which payors consider beyond strict appropriateness guidelines generally accepted in most advanced industrialized countries.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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