Ethical Health Partnerships

  Proposed Medicare Cuts: 2006-2012 Will Affect ALL Patients

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Dawn Lipthrott, LCSW
Ethical Health Partnerships
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Proposed Medicare Cuts in Physician Payment: A Problem for all Patients

Congress is expected to vote on this issue in the Fall of 2005. You can take action here.

Submission to the House Ways & Means Committee Hearing on the Proposed Cuts
Submission to the House Ways & Means Committee Hearing on the Pay-for-Performane Proposal

Since 1991 Medicare has steadily cut reimbursement to physicians. The issue comes up nearly every year. In 2004 and 2005, additional cuts were scheduled but were prevented in Congress. The problem is that the same proposed action by the Medicare trustees also include 5% cuts each year through 2012. What this would mean for physicians is a 31% decrease in reimbursement over that period of time. It would make payments to physicians less than half of what they were in 1991. However, this is not only about Medicare patients, or physicians who see patients on Medicare. The effects multiply exponentially because many private insurance companies, HMO's, network management companies base their fees on Medicare fees. So when Medicare rates go down, so does the reimbursement from private insurance. During this period of cuts, physician's practice expenses excluding income is expected to increase 19%.

In this situation the Medicare program trustees fail to maintain ethical health partnerships with physicians and with patients. Although Congress has intervened at times, the pattern has been so for over 10 years, and this new round of reductions is inexcusable. Some physicians simply will not be able to sustain their practices. In Florida and in many other states, this is coupled with outrageous malpractice insurance costs. The average for general surgeons in Florida outside of the Miami area was $174,000 in 2003 and $227,000 in the Miami area. (Medical Liability Monitor). At least one malpractice insurance carrier in Florida, Maryland, Iowa, Connecticut, Colorado, Arizona, New Jersey, Michigan, North Carolina, Ohio, Oregon, South Dakota, Washington, Wisconsin, Wyoming and Delaware requested rate increases of 40-99.9% for various specialties. Illinois, Mississippi and Oklahoma saw at least one carrier requesting increases of more than 100%. 15 other states saw one one or more carriers requesting increases of 25-39.9%.

Why is the Medicare relationship with physicians unethical? It completely disregards legitimate needs and costs of physicians to maintain their practices. It is unjust in that undue burden is placed on one group and that one group is penalized to make up the deficits of other groups. It shows a disregard for the fundamental wellbeing of the 'other', in this case the physician, and ultimately patients. It puts some physicians in jeopardy. Putting physician's practices in jeopardy means that patient access may be reduced.

So why do these cuts happen? They happen because there is a fundamental flaw in the system that needs to be addressed in an effective way, rather than leaving the problem in place and trying to prevent bleeding with bandaids. The reason for the cuts is something called the SGR (Sustainable Growth Rate) formula. This formula ties physician payment to the Gross Domestic Product, which fluctuates based on the ups and downs of the economy instead of basing rates of pay on the health needs, frequency of use of health care by seniors, and the costs of providing those services. It also does not consider basic cost-of-living increases and rising practice expenses of healthcare providers. Only physicians and other practitioners are subject to the SGR. According to the American Medical Association, hospitals, who are not subject to the formula, are expected to receive increases of 32% over the same period.

Another factor that makes the SGR flawed is that when Medicare expands benefits, like the current drug benefit, the costs to cover those benefits in a way triggers the SGR and leads to reductions in physician payment. So when we are talking about ethical health partnership, you have a situation in which physicians are 'punished' for something outside of their control and made to bear a burden that does not belong to them. It is somewhat like 'robbing Peter to pay Paul' and causes damage to physicians that are the essential providers of our healthcare.

Attempts have been made to revise and fix the SGR formula, but none have been successful in addressing the core problem. In fact, Medpac, a committee that provides information and suggestions to Congress about Medicare, has recommended eliminating the formula and addressing the increasing expenses of physicians when setting reimbursement rates. I support that recommendation.

Take Action Now to Prevent the Proposed Cuts. Over 300 members of Congress stand with you.

© Dawn Lipthrott, Ethical Health Partnerships, 2004
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