The title of this diary is not an attention getting gimmick. It's exactly what is going to happen one month from now, on March 1, 2010, if Congress does not act to forestall a scheduled 21.2% decrease in average Medicare and Tricare payments for physicians.
There is no typographical error in the placement of the decimal point. The pre-ordained cut is twenty-one point two percent.
Physicians can stay in business because they are able to cost-shift from what they are compensated for caring for patients who have commercial insurance -- to cover for Medicare patients, where they typically barely break even, and Medicaid patients, where they typically lose money for each patient, and the uninsured and indigent, for whom they generally get paid nothing at all.
A 21.2% cut? No amount of cost shifting (from ever-decreasing insurance payments) is going to cover that. So, Dr. Kossack, imagine yourself to be a primary care physician with a fairly high percentage of elderly Medicare patients, many of whom have chronic conditions and require a lot of care and attention, and you're trying to keep the lights on. What are you going to do?
Read on for a little history, and what is likely to happen.
UPDATE: Comment on this being a "greedy doctor" problem below.
BBA, SGR and playing chicken
There has been an annual game of brinksmanship going on every year since the Balanced Budget Act of 1997 (BBA) put into place an absurd formula called the Sustainable Growth Rate (PDF) (SGR) that punishes physicians for reducing health care costs because of their historical success in moving (PDF) a significant amount of care that used to be done in hospitals to much more efficient, patient-friendly, safer and less costly outpatient settings. The formula basically says, "The more physicians do in outpatient settings, the less Medicare is going to pay physicians -- to maintain budget neutrality."
After all, it was the "Balanced Budget Act". And Congress was sold on the concept that physicians, if paid less in an attempt to control Medicare costs, will act in their narrow financial self-interest by seeing more patients and doing more procedures. So, the SGR seeks to make sure that physicians aren't so rewarded.
Trouble is, Congress apparently didn't consider the possibility that advances in medical care and better technology would also move patients into the outpatient arena, totally apart from anything to do with physician self-interest.
And Congress also didn't factor in to the formula at all the annual rise in the costs to physicians of seeing patients and keeping the doors to their offices open. Those costs have gone up much faster than the annual inflation rate.
This ritual of a threatened annual cut in Medicare payments to physicians has been going on for 13 years. Every year, either just before or just after the deadline, Congress acts to change the threatened cut to keep Medicare payments about the same, or to put in place a tiny increase that is usually a fraction of the annual inflation rate.
So, adjusted for inflation and for the costs of practice, Medicare payments have been at best declining slightly every year for many years. In fact, measured in 2007 dollars, physician Medicare rates are now at 1994 levels, while practice costs have skyrocketed.
This year is different, and not just because of the recession. The threatened cut has never been anything close to 20% before.
But as the infomercials might say, "Wait -- it gets worse!" In 2011, the scheduled cut, to be added to this year's cut, is 23%. And by 2016, absent Congressional intervention, Medicare rates will be cut by approximately 40%. During this same time, practice expenses are expected to rise by 20%.
And that, of course, is completely unsustainable.
Physicians
Congress was also very slow in realizing that we don't have a physician glut. (They were sold a bill of goods by the managed care industry in the 1980s: "We have too many physicians, especially with us managing the care" -- and we all know how well that turned out.) On the contrary we have a huge shortage of precisely the kinds of physicians who are likely to see most Medicare patients: primary care physicians. Nobody stopped to consider the fact that the overwhelming majority of physicians these days are not sitting around trying to figure out how to attract more patients. In fact, most physicians are trying very hard to figure out how they can possibly cope the the overwhelming demands of their existing practices, and how they can provide decent care to the patients they already have.
Of course, hospitals have no such restrictions on what they get paid. They get an annual "market basket" increase in their reimbursement. Aside from marginal rural hospitals, most hospitals these days are quite profitable.
The overwhelming majority of physicians willingly take care of Medicare patients. Doctors like taking care of patients -- that's why they went into medicine in the first place. But doctors are not in business to subsidize Medicare, and that's exactly what the current Medicare system asks them to do. Medicare seems to say to physicians, "The Medicare system is losing money because of doctors, so we're going to make you pay for it." So, in effect, Medicare is telling doctors that they have to pay the government for the privilege of seeing Medicare patients and losing money on each Medicare patient that they see. While it's true that incentives have not been optimally aligned to encourage the most cost-effective care, Medicare deficits have much more to do with accounting than physician behavior. Physicians are not going go along with being asked to pay for a broken accounting system.
Medical practices are mostly small businesses
Overhead for physician practices typically runs higher than 60%. There is staff to be paid -- nurses, assistants, receptionists, technicians, people to fight with insurance companies when they try to deny care. It's hard to run a physician's office without paying for niceties like rent, heat, electricity, supplies, and liability insurance.
It's also important to remember that the majority of care in this country is still provided by small practices, not within huge corporate integrated systems. At least, not yet; although we have been shifting rapidly in that direction. But right now, most care is provided by small businesses. Like any other small business, there is not a lot of margin. You can't pay your bills, you close your doors.
The observation that Medicare payments barely cover the cost of seeing the patients will vary a bit by specialty, and by geography because Medicare rates differ by state. But the statement is substantially correct -- and that's before the scheduled cuts take effect.
Not even comparatively wealthy hospital systems that employ physicians can afford to care for a substantial fraction of their patients at a significant loss.
So, what's likely to happen?
Many physicians are already limiting the number of Medicare patients they will accept. Because physicians do put their patients first, I think and I hope that most will continue to see their existing Medicare patients even if the 21.2% cuts go into effect. But it's a pretty safe bet that the overwhelming majority of physicians will do the math, and conclude that they simply cannot keep their businesses open seeing patients at a substantial loss, or being forced to provide very substandard care. The door for accepting new Medicare and Tricare (the system for coverage of active duty military service members and their families) will very likely start to close. Some physicians will limit the service available to Medicare patients. Most Medicare and Tricare patients will find it increasingly difficult to find physicians who will accept them. Some physicians are already opting out of Medicare completely -- meaning that their Medicare patients will need to find care elsewhere -- and if there is anything close to a 20% cut, that trend will increase dramatically and precipitously.
In Texas, 58% of physicians recently said that a substantial Medicare cut would force them to limit the number of new Medicare patients whey could accept. It's much worse for primary care physicians -- only 38% would continue to accept new patients.
In fact, amongst internal medicine physicians, who take care of only adults and are disproportionately affected by the challenges of taking care of Medicare patients, what is happening right now, before any additional cuts, has already reached crisis levels. Of the 93 internists affiliated with New York-Presbyterian Hospital, for example, only 37 accept Medicare, according to the New York Times.
Further decreases in access to care for Medicare patients would be a disaster. Many patients will suffer and many will die, needlessly. Because of a stupid formula that Congress has not had the gumption to fix.
The AMA has been fighting this for years. The House of Representatives at least has gotten the message, and late last year passed H.R. 3961, to permanently do away with the flawed SGR, and put in place a sane reimbursement system that would not require emergency action every year. But the Senate -- prisoner to its own refusal to deal realistically with the budget and taxes and spending -- of course, refused to touch it. It hasn't made it any easier that Congress long ago realized that the SGR was a very convenient device to extract whatever concessions it wanted each year from physicians: go along (e.g. with the horrible provisions in Bush's "Medicare Improvement Act of 2004") or else you don't get your SGR fix this year.
This year's cut was originally scheduled to take place on January 1. Congress passed an emergency provision to forestall this for two additional months, until March 1.
So here we are. Here's what the AMA and AARP are putting out as part of a campaign to put this issue on the front burner:
And ten days ago, both of these organizations sent a joint letter (PDF) to Harry Reid and Nancy Pelosi, pleading for prompt action.
Conflict of interest, disclaimer, and a request
Please allow me to declare my conflict of interest: I am a physician, and my wife is a physician. Those of you who may have read my previous diaries may recall that I'm also an elected delegate to the AMA House of Delegates, the body that debates and establishes AMA policy. While I reference AMA information in this diary, I am NOT representing or speaking for the AMA, and my opinions are strictly my own.
But I'm sure that having said that, there will be those who will reflexly trot out the AMA's old history of opposition to Medicare 45 years ago, and simply dismiss the AMA as just a special interest group, and therefore also dismiss what I've put forward here as being tainted and suspect. Let me assure you from my many years of participation in organized medicine that the AMA is a highly diverse and very democratic organization. There is a great spectrum of opinion amongst its membership. In fact, the AMA has been increasingly progressive in recent years in not only strongly suporting but in taking a leadership role in bringing about true health system reform. The AMA publicly supported H.R. 3962, the House's health care reform bill that included a public option. Please note that despite a substantial amount of controversy within the AMA House of Delegates, the AMA did not oppose the public option. And the AMA has been incredibly diligent in putting the needs of patients first. That doesn't make the AMA immune from criticism, but I would respectfully request that this give pause to any reflexive dismissal of its advocacy, or the extensively documented factual information that it makes available to the public.
Action
It is doubtful that Congress will be foolish enough to allow the 21.2% cut to go into effect on March 1. There will likely be another band-aid slapped on this completely dysfunctional way of compensating physicians for the care of Medicare and Tricare patients. But PATIENTS deserve better than this. There WILL be decreases in access to care even with this year's band-aid fix, as more and more physicians conclude that it's just not worth it to continue basing the future health of their practices on a business plan that is this uncertain and so much at the mercy of partisan politics, and that asks them to finance the failure of Congress to put in place a system that is based on economic reality. Please contact your Representatives and especially your Senators and urge them to resurrect what the House did when they passed H.R. 3961 to get rid of the SGR.
One last comment
It's no secret that while most all physicians agree that our health care system is seriously broken and are very supportive of the idea of reform, many physicians have not been terribly enthusiastic about what Congress has done so far. There are a lot of factors that contribute to this lack of enthusiasm; some of it is simply partisan politics, and some has to do with the failure to address medical liability in a more substantive way. BUT a huge part of the reticence has to do with exactly the kind of failure that a dysfunctional Congress demonstrates with its inability to fix a seriously flawed physician payment formula that just about everyone, Democrat and Republican, concedes is broken. And while there is a sizable percentage of physicians who would consider, in theory at least, a single-payer system such as Medicare for all, even the most fervent single-payer advocates are given pause when they consider that Congress persistently refuses to fix something as straightforwardly broken as the SGR, which threatens -- not 30 years from now but 30 days from now -- the continued viability of the Medicare system we have now. How, they might ask, could we possibly function if we had Medicare for all without first fixing Congress?
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UPDATE: I greatly appreciate the many thoughtful comments.
Yet the only response by many commenters below to a looming disaster is to lash out at "greedy doctors", and hospitals that charge too much. I fully understand that everyone's emotional response to an issue is shaped to a large extent by personal experience. But this is supposed to be a fact-based community. You may not like the fact that physician practices are businesses that have to pay their bills, but the fact is that they are businesses, most of them small businesses. You many not like the fact that physicians get paid anything at all, but the fact is that physicians have families to feed and educate, and huge educational debts to repay (often approaching a half-million dollars when interest is included), and physicians generally earn next to nothing until they are over 30. You may not like the care provided by your personal physician, but have you stopped to consider the system that she or he is working in, and the challenges your physician is facing on a daily basis?
Yes, there are bad actors. Of course there are bad actors, like the one pointed out below who is a coke addict. Does that mean that you want to punish all physicians and their patients for the fact that there are assholes in the world, and some of them happen to be doctors, and refuse to fix a broken system that can be easily fixed by Congress if they could muster the political will to do so? Do you want Congress to make decisions based upon anecdotes, rather than facts?
And I will point out that by blaming physicians for a very badly conceived formula that threatens the viability of their businesses, you are doing exactly what Congress has chosen to do. And you are completely ignoring the fact that patients will suffer and die, unnecessarily. We have spent huge amounts of time and energy during this past year on HCR. Isn't that why we've been so rabid about HCR -- to prevent just that sort of thing from going on?
Worse, several commenters apparently seek to punish physicians and their patients for the demographic fact of the boomer generation. "The boomers are going to wipe out Medicare and Social Security, and I won't get a penny." I thought only Republicans saw the world through the lens of personal self interest. This seems to translate as, "I may not get MY Medicare, so why should I give a damn about seniors and boomers who are going to lose access to medical care a month from now?"
Quite frankly, I expect better from this community. If the only response to a looming Medicare crisis that will hurt patients is to blame "greedy doctors", many of whom are truly struggling, and to conflate doctors with hospitals, then we really are in trouble.