A 21% cut for Medicare physician fees is set to go into place soon. This year, fixing physician payment has been overshadowed by all the talk about health insurance reform.

In fact, I remember being invited to talk about healthcare reform on a panel for medical students this past fall. As part of my remarks, I mentioned the 21% pending cut in physician payment and recall the questions and quizzical looks. Another panelist said – “oh but that won’t happen – they (meaning Congress) will fix it.”

Actually, the truth is we believed they would fix it . . at least in the short-term. After all, I have gone to Washington DC for the past 5 years for the American College of Physicians Leadership Day and have taken several residents and students with me through the years. Each year, we are fortunate to hear Bob Doherty, ACP Vice President and top health policy blogger, give a riveting update on what’s new on the Hill. And for the past 5 years, the recurring theme has been the need to fix the physician payment system and the ‘flawed formula’ that calls for the cuts.

I was even lucky enough to participate in a Congressional hearing on the issue in 2006. And every year, Congress has passed a short term fix to the problem. Believe it or not, there seems to be general agreement that the system for paying doctors needs to be fixed. The issue is how to pay for it. As discussed in the Wall Street Journal:

The calculus on this issue is always basically the same. There’s widespread political support for blocking scheduled pay cuts to doctors. But doing so is expensive. So rather than get rid of the formula that keeps calling for the cuts — which would require Congress to acknowledge that the country is going to be on the hook for billions of dollars in additional Medicare costs — Congress keeps passing these short-term patches.

As I have discussed topic over the years with a variety of students and residents, I have noted a lot of confusion on these issues. That isn’t entirely surprising since health policy isn’t a required course in medical school . . . but maybe it should be? To better understand this chain of events and why all of this is really happening, I’ve outlined some basic questions and answers below.

How are doctors paid? Doctors are still paid on a fee for service system for their time. When Medicare initially passed in 1965, to get physician support, Congress agreed to preserve the fee for service system. To determine the actual value of physician services, a ratio system (RVRS) was introduced in 1992 that determines the value of one service to another and adjusts for geography. Every five years, an AMA committee (RUC) composed of representatives from each specialty society debates the relative values of physician services and publishes the book that sets these ratios.

It is widely believed that the RUC is overrepresented by subspecialists who have led to undervalue of primary care services. More recent concerns about the incentives to ‘do more’ in the fee for service system have led to some to argue for the ‘bundling’ of physician payments.

What is the SGR? The Sustainable Growth Rate is a general marker of inflation. In 1998, due to concerns of escalating healthcare costs, Medicare payments for physicians were tied to the SGR. Unfortunately, healthcare inflation outpaces general inflation and since 2002, the cost of physician services has exceeded what would be predicted from the SGR. Hence, every year a predicted cut in Medicare physician fees to bring it back to the SGR. Each year, because a temporary fix is passed, the next year the cuts get worse.

What is pay-go? Because of pay-go rules, new legislation that increases spending has to include cuts elsewhere. In this environment, it makes it harder to pass a costlier bill. Unfortunately, a long-term fix means getting rid of the SGR and replacing it once and for all is very costly. So in this environment, it is easier to get a short term fix passed.

This year, the AMA, ACP, and other professional organizations stated they no longer support a short term fix and called for a full repeal of the SGR. In fact, because the ‘doc fix’ costs so much, it was removed from the calculation of the cost of the health reform bill to make it more likely that the health reform bill will pass. To get support of physicians for health reform, Democrats said they would pass a long-term doc fix.

Why do we have to fix this? As you can imagine, a 21% cut in Medicare physician fees would likely result in limited access for seniors and veterans. Reports already highlight that doctors will be forced to drop or delay seeing their Medicare patients until they know what will happen. Although many physicians ‘participate’ in Medicare, it is unknown how many may be limiting the number of Medicare patients they would see.

Since Medicare is the largest payer, it is likely that other insurers will follow suit and cut physician fees. Lastly, all the money and time that goes into the short term patches have left physicians tired, uncertain of the future and with little faith in the legislative process.

We need to fix this so we can move onto other pressing issues in healthcare.

Vineet Arora is an internal medicine physician who blogs at FutureDocs.

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