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Medicare cuts in MD reimbursement

California HealthLine has an excellent roundup of Medicare news. Most significant is their take on physician reimbursement, which is slated to be cut by 4% on 1/1/2006. Lawmakers appear to be interested in rescinding the cut, which would be consistent with their actions the last time Medicare physician reimbursement cuts were slated to take place.
Expect changes late in the year or early next – I know, early next year would be after the cuts are scheduled to take effect. The political winds are moving in that direction, with the AMA and AARP staking out positions (no surprises there)
What does this mean for you?
1. With most state WC and other fee schedules tied to Medicare rates, cuts in physician reimbursement will directly affect payouts in these lines of insurance.
2. If Congress does not act until early next year, companies tasked with implementing fee schedule changes will find themselves burning the midnight oil to build fee schedule tables that can meet either eventuality -cut or no cut.
3. PPO discounts are often pegged to Medicare, so their revenues will either increase or stay the same, depending on what Congress does.
4. And most important, a decrease in reimbursement will lead to more physicians dropping out of Medicare, Medicaid, and any reimbursement program tied directly to Medicare. Today physicians ask for, and receive, reimbursement higher than the state fee schedule in WC in Massachusetts. Florida raised its fee schedule from 87% of Medicare (on average) to 114% in large part due to physicians refusing to take the lower reimbursement. Early evidence is physicians are returning to the system, and utilization has not increased.
Editorial statement – price controls simply do not work. When will the politicians, managed care “experts” and PPO companies learn this?

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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