Medicare slashes pay to doctors, and what that really means

What we’re learning from the 21% Medicare pay cut to physicians that occurred today:

* There really must be a cost-control crisis with Medicare and the only politically-acceptable way to implement those cost controls are by cutting working physicians’ payments.

* There’s was widespread political support for blocking the scheduled pay cuts to doctors, but central government control moves very slowly. That’s because doing so is expensive. For now, doctors have been asked to hold on to our billings for about 10 days so they can put through another temporary patch that will further delay the cuts until October 1 (pg 107) as part of a jobs bill, paid for by stimulus funds.

* If they are serious about not cutting physicians’ payments, Congress must get rid of the sustainable growth rate formula that keeps calling for the cuts and acknowledge that the country is going to be on the hook for billions of dollars in additional Medicare costs. Right now, that’s not sounding too popular. Better to stand by your plan and not mention these additional costs to the nation.

* We also see that Congress will not commit to fiscal conservancy when it is politically ill-advised to do so. Recall that the Sustainable Growth Rate (SGR) formula, part of the Balanced Budget Act of 1997 was enacted on August 5, 1997 to replace the Medicare Volume Performance Standard (MVPS). Section 1848(f)(2) of the Act specified the formula for establishing yearly SGR targets for physicians’ services under Medicare and was intended to control the growth in aggregate Medicare expenditures for physicians’ services. Since this formula to control Medicare costs is very likely to now be overturned, what does this say about other well-intentioned but politically unpopular policy initiatives planned to save costs in years ahead?

* Policy decisions run by a single central body affect the entire United States and not just a portion of it. Sweeping legislation that affects the entire United States carries high risks to the nation as a whole if initial planning assumptions are incorrect.

* As mentioned by others today, new primary care doctors are avoiding government healthcare because it cannot cover their costs. Even large institutions like Mayo clinic have done the math and aren’t taking Medicare patients at some of their primary care sites. As others follow suit, this will put further strain on primary care physician availability.

Of course, now that the physician cost cuts are underway, maybe we should just stay the course and see what happens.

As crazy as that might sound, I bet it would ultimately give us some real change we could believe in.

Wes Fisher is a cardiologist who blogs at Dr. Wes.

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  • Rod

    Everyone knows they will get a short term break again on this, they have been doing it for years, why so many posts on this topic. Doctors should bombard their societies to take lead rather than whine and whine. From a common person stand point why is health care going up so much faster than GDP. My phone was $600 initially now 150 but in health care the same xray and CT costs 10 times more as time goes by,makes no sense at all. Come up with solutions rather complaints. Take charge of your profession

    • Anon

      I agree with you, but if you frequent this blog, you will have seen several examples of physicians taking charge of their profession, normally by converting to a cash only practice. It’s a movement that is gaining momentum, and it will be interesting to see how patients and people in Washington respond to this solution on a larger scale.

      • rod

        And that is the solution??? Cash for medical care by some providers, what happens when the patient needs more work up say he has a funny lesion in his lung and a smoker. Unless something fundamental is done to cut down waste in health care, with these kind of deficits, there is no easy way out. Areas that have Tort reform showed no slowing of costs in many areas and doctors can still fight for this tort issue but there is a bigger issue, you are the ones who can weed waste, educate patients, reassure when test aren’t needed. You have the ability to keep things from going worse but sadly you have no plan, no leadership, too split and too focused on fee for service.

        • Anon

          It’s amazing that anyone got any care in the days before insurance, right? One of the drivers of medical inflation is the vast overhead that is required just to be under-reimbursed for services already rendered. Depending on the visit, some medicare patients are actually a tax-deductible loss, something like charity work. So, yes, I would agree that a cash model won’t work for every field in medicine. However, it would work for primary care, and that’s a good place to start.

    • Joe

      The reason costs go up isn’t that the cost of procedure or drug or machine X goes up, its that we quickly shift to the newer and more expensive and SOMETIMES more effective procedure/drug/machine Y.

      Its like a cheap cell-phone is now $20 instead of $100, but now you buy an iphone for $300. The old tech got “cheaper,” but we opted for the new tech instead. This is both the reason the US has some amazing high tech medical care and the reason why costs are spiralling out of control, and why (in my opinion), comparitive effectiveness research and Cost/Quality adjusted life year is what insurance coverage should be based on to make sure we get what we pay for.

  • lazza11

    It should be noted that the current crisis is not really a deliberate move by either major party (all comments on the SGR are right on) – it has all been triggered by Republican Sen. Jim Bunning of Kentucky blocking democrats $10 billion measure to keep payment rates intact (temporary fix).

    Democrats favor repealing the SGR law, but no longer want to do it as part of the HCR bill as republicans have proven willing to attack this as a cut to doctor’s pay.

  • lazza11

    Sorry – doctor pay comment incorrect. It has been more of an attack against spending (despite republicans being similarly unwilling to allow the SGR cuts to happen OR repeal the SGR.)

  • T Steadmon

    I, for one, hope the cuts become permanent, though I fear Congress will slap a bandaid on the problem once again.

  • Mike

    Funny how people think they know so much. As a physician I can tell you I haven’t seen any real increase in my fees for over a decade. Health care costs may be going up, but it has absolutely nothing to do with what I charge because my charges are completely irrelevant – every insurer including Medicare and Medicaid tell me what I will get paid and that is ALL I get. I’m not poor, but that does not make me the cause of the “crisis” in health care. I make a little over $40/hour – I will not accept much less than that before I drop out of the system completely. The only reason I make more than the PA that I employ is that I work 60 hours per week instead of her 40. Yes I’m whining, but I’m getting to the point I don’t give a what anyone else thinks. Let the cuts stick, I don’t really care any more, but I can tell you one thing, I will not work for free, and therefore absolutely will drop Medicare/Medicaid/Tricare (half my practice) and adopt the micro-practice model (look it up). That means 8 staff join the ranks of the unemployed.

  • Edward

    If the cuts become permanant it will make business decisions easy. Stop participating in Medicare.

  • Steven Wynn

    Why is everyone making such a big deal out of ONE senator. There are at LEAST 40 other senators that prevented this from happening.

    MAYBE it’s because the Dems decided to bundle the SGR bandaid with a other unfunded initiatives like the extension of unemployment benefits and cobra. The Dems decided to put the SGR fix in a package with other stuff hoping the Repubs would bite. Well, they didn’t and people only place blame on the Repubs?

    Blame goes to both parties, not just one. Both teams screwed please quit trying to politicize this (yes you, lazza).

  • anonymous

    to rod:
    these are cuts for services provided by doctors, not for technologies. what service providers haven’t raised their rates over the past ten years? i guess carpet sewers and others industries that have been reduced in importance over time by industrialization. otherwise generally cost of labor has gone up. are you also in favor of everyone employed by physician office getting pay cuts? cutting the revenue to doctors doesn’t do much to address spiraling healthcare costs.

  • lazza11

    “Blame goes to both parties, not just one”

    I am sorry – I am a very moderate democrat, but the SGR fiasco lands principally at the door of Republicans in my book, and this current crisis lands at the door of Senator Bunning.

    The Republicans created the SGR law (and I DO give them credit for attempting to control costs, but the SGR was created at a time when cost growth was unusually low). While still in power the republicans passed “patches” to stop physician cuts on 3 separate occasions (thus somewhat institutionalizing the patches) rather than EVER attempting to fix their legislative mess. Now it is left to democrats, who want to abolish the SGR – but cannot get any bipartisanship to clear up this republican mess. Dems have another plan to address cost growth (the HCR bill – whether you agree with it or not – and of course many do not!)

    Bundling of legislation is 100% normal proceedure in congress – so it is not unusal, and Sen Bunning has blocked a bill written in a bipartisan manner (D’s & R’s) and has most recently blocked the bill after it was brought to a vote by fellow Republican Susan Collins – he is undertaking an unprecedented one man filibuster of unemployment benefits and other neccessary spending and I do not see how you can pin this one on Dems?

  • stargirl65

    I really don’t care who is to blame. If they don’t fix it, I am out of Medicare. I earn basically what I earned in 1994. My first year out of training.

    This 21% decrease in Medicare payments is like a 50% pay cut to the doctor. Example: Visit is paid $50. $30 to overhead and then $20 to me. Now you do a 21% pay decrease so visit is $39.50. $30 still to overhead and I now get $9.50. I cannot do this and keep my doors open. I have already stripped my overhead as much as possible. The only things left are to cancel electricity, phones, etc. and not pay my staff. (I only have one staff person.)

    • Anonymous

      I agree. I can’t cut anymore. I am working at several different sites to supplement my income and I can’t fit in anymore jobs on the side. I am in a rural area and the patients are mostly retirees. I think the AMA has sold us out in endorsing the health care bill. I already don’t get paid probably 30% (maybe more) of what I am due because of billing conflicts and patients who do not pay. I send in bills which are rejected routinely for one reason or another. I also have to deal with the public perception and resentment of my income which is way overinflated and I was not helped by “his royal highness’s” remarks on the greed of doctors. I am a small town doctor doing the less than glamorous work of a family practitioner and wishing I could retire ASAP(I can’t). I don’t enjoy being a doctor anymore, the business end of it is killing me. It’s not the senator from Kentucky who did this, I agree with him, we can’t afford anymore pork barrel politics, let’s say the truth, the dems don’t see the medical field as one of their constituencies. They are using Mr. Bunning as an excuse to retaliate against us, look at Obamma’s rhetoric about doctors. He plays class warfare every day, those evil rich people, those evil bankers, those evil doctors(doing unnecessary surgeries etc.). This isn’t over and there will be more cuts until we all work for a government clinic and are called “providers” I worked at a government clinic for a time and they insisted on referring to us as providers so there would be no difference in respect for doctors and nurse practitioners. Which brings me to this observation, I think the new health system will become heavily dependant on nurse practitioners and PA’s (less expensive). They won’t need family practitioners and they could care less if they destroy us. We are to blame (through the AMA etc) because of our own complacency.

  • cynthia bailey md

    I am a specialist who has a lot of Medicare skin cancer patients and I’ll have to opt out of Medicare if the 21% reimbursement cut is not reversed. My profit margin is tight and my office overhead is pretty much fixed. The only way to get overhead down is to have less staff, which I can only do if I have less patients. This will also lower my cost for medical supplies and office stuff. It would be a tragedy and a personal crisis for me because I love my skin cancer practice and my medicare patients. I can’t pay my bills, however if I’m asked to singlehandedly subsidize Medicare. This is exactly what the government currently asks of physicians for Medicaid.

  • Mary Bee

    I’m a senior citizen on medicare with a 2nd insurance through my workplace retirement package. If my doctor drops his medicare patients, I’m not in a financial position to sidestep my insurance and pay him directly. I like my current PCP, but I don’t consider this particular doctor so indespensable to go into debt to pay him. If I couldn’t find another private doctor to take me, I would have no choice but to transfer my 2 insurances over to an HMO like Kaiser.

  • Kari

    You do get what you pay for. Maybe Rod wants to tell someone that they have ALS or Alzheimer’s or a brain tumor for free but I’m about to be done with this. My practice can’t survive the loss of the consultation codes and the 21% cut. I have 2 employees and they will be out of a job also.
    The good news is that my IQ is still high, I am used to working 80+ hours a week under huge pressure and with limited sleep. There are many other things that I can do. Too bad really. I like the practice of neurology and would like to continue but no company can run in the red for very long. I hope you don’t need a neurologist, rheumatologist or endocrinologist Rod. There may not be any left for you to see. But that would be fitting justice I think.

    • Rod

      Hello, please read my post again, I not implying any sort of cuts, I am saying doctors are not taking leadership in significant way ,they need to lead NOT whine. There is abundant waste in health care, just by taking this on on small scale and you can say goodbye to SGR cuts forever. Doctors have been overpowered by Device companies, drug companies, split amongst themselves which is bad for patient care.

  • gerridoc

    It makes absolutely no sense that physicians are being paid less and the cost of healthcare continues to rise. A prominent economist has stated that our fees make up a small percentage of the total expenditures. Most physicians feel it is an obligation to accept Medicare, but perhaps it is time to rethink the situation. It certainly doesn’t look like our prospects are going to improve anytime in the near future!

  • TrenchDoc

    It is very difficult for Doctors to lead because of the antitrust laws we are subjected to. We can not meet to discuss fees even if that means a decrease in fees. We can not share equipment or organize except under very strict guidelines. Those are called the Stark Admenments. The only way we can lead is to completely pull out of Medicare and all private insurances. What would you think would happen if any group of doctors did that in any city in America. Between the lawyers, politicians, pharmacy reps and hospital administrators we are out numbered. But one thing for sure is coming and that is if I as your doctor get paid less for caring for you and you are the least bit difficult or medically complex I will be telling you to find another doctor.

  • LesCarter

    I agree with most of the comments above, but think doctors as a group have to bear some of the responsibility. The SGR has been law for years, for one.
    Mostly, however, though the federal government doesn’t act like it, fiscal resources are limited. That we physicians continue to spend Medicare dollars like there’s no tomorrow, yet expect no repercussions on monies available to pay us, is delusional. Financial incentives in medicine are terribly wrong. As MD pay declines, only the large (mostly subspecialist) groups that own millions of dollars of MRI’s, surgery centers, SPECT scanners, all kind of scopes, etc. will survive and flourish. Primary care will be relegated further into obscurity.

    • stargirl65

      Studies have supported that medical practices with more testing facilities in house tend to order more testing than those without. If you have a very expensive machine to pay for then you want to use it. Therefore the higer paid specialist with all the machines makes more in two ways. They get more from procedures and they get more from testing in house. It is hard for primary care to do in house testing unless they are a very large group as their services are so diverse. What testing would they choose to do? Xray? Lab? MRI? DEXA? Ultrasound? Also most insurance companies will pay me NOTHING for in house testing as they say they have already contracted with XYZ radiology and lab center to do it for them.

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