Here we go again.
Congress held hearings on May 5 to consider another Medicare “Doc Fix.” Medical societies showed up to offer their complaints and solutions at a time of calls for cuts to government spending.
Physician payments for treating Medicare patients will be cut by the Centers for Medicare and Medicaid Services (CMS) by 29.5% beginning January 1, 2012. Further cuts of more than 20% will be mandated through 2016 according to the SGR (sustainable growth rate) formula established by Congress in 1997.
Various experts have estimated that practice costs will increase by more than 30% over the same period.
Temporary $276 Billion Fix
Recognizing the disconnect between rising costs, declining payments and fearing that physicians will stop seeing new Medicare patients, Congress has continually voted to override the mandated cuts and pump more money into the “Doc Fix.” The Congressional Budget Office (CBO) estimates that maintaining current payments would cost around $276 billion for the remainder of the decade.
During last year’s health care debate, a proposed permanent fix of the SGR formula was defeated by Republicans and Blue Dog Democrats in the House because they said it required further borrowing.
But this year House leaders are teasing physicians with a promise of a permanent fix. At the Congressional hearing, the new Republican Chairman of the House Committee on Energy and Commerce, Fred Upton of Michigan, said a repeal of the current payment formula is on the “short list” of things to get done this summer.
That will be a tough commitment to keep.
Upton’s fellow Michigan Republican, Congressman David Camp, chair of the powerful House Ways and Means Committee, told a Health Affairs briefing on May 5 that finding $300 billion for a ten-year fix “was untenable in the current situation” when Congress and the White House are struggling to find ways to reduce the $1.5 trillion budget deficit. Rather, he said, the Republican-led House will consider a “several-year fix…to get out from under this, and then look to the long-term fix.”
The only solution acceptable to physicians is to scrap the SGR and replace it with a predictable reimbursement rate that is tied to actual increases in cost of services.
That’s the message North American Spine Society (NASS) and a broad group of medical societies delivered to Upton’s committee. While the societies agree the SGR must be scraped, they are far from united in how future Medicare dollars should be divvied up between providers. The divisions between the American Medical Association (AMA) and surgical societies exposed last year during the health care debate surfaced again as primary care physicians lobbied for a bigger piece of the payment pie with their recommendations for a doc fix.
The Primary Care Gambit
The American Medical Association and American Academy of Family Physicians (AAFP) want to see a higher reimbursement rate for primary care physicians than for other specialties and an increase and extension of primary care incentives included in the new health care law.
In addition to repealing the SGR they recommend, “Implementing a five-year period of stable Medicare physician payments that keep pace with the growth in medical practice costs.” They also want to try out a new generation of payment models (medical homes, for example), then transition to those that improve quality, care coordination and costs. The AMA also wants Medicare to permit balance billing—physicians charging Medicare beneficiaries for an amount above and beyond what the government program covers.
NASS: “Not So Fast”
One specialty society, the North American Spine Society (NASS) wasn’t buying the AMA/AAFP approach.
NASS President Greg Przybylski, M.D./NASS
In a seven-page letter to the committee signed by NASS President Greg Przybylski, M.D., (read the letter in it’s entirety here) the Society wrote, ” Disproportionate annual updates to various stakeholders within Medicare should be avoided…Any system attempting to replace or improve the current SGR should equally adjust payments for all physicians.”
In addition, NASS argues that any system used to replace the SGR formula should look into all aspects of Medicare outlays, including Medicare expenditures to non-physician providers such as hospitals, nursing homes, DME providers, Medicare Advantage as well as technical costs for imaging services.
The Devil of Relative Values
The AMA holds a unique position in the payment debate. It controls the codes used to determine the value of physicians’ services.
Physician payments are based on the codes that are valued through a process undertaken by the AMA’s Relative Value Update Committee (RUC), a panel of 29 volunteer representatives from both primary and specialty care.
Declining Surgical Values
According to the NASS letter, in the last few years, RUC has recommended substantial increases to values for primary care services, preventive services, emergency services, home visits and nursing home visits while values for surgical procedures have decreased significantly.
“Between 1993 and 2002, Medicare payment for new office visits increased 73% and established visits increased 67%. During that same time period, payment for major procedures decreased an average of 8%, with some procedures such as cataract surgery, coronary artery bypass graft surgery and joint replacement surgery decreasing 43%.”
While overall physician payments have declined over the past few years. “Significant steps have been taken to improve payment for primary care, ” notes NASS. The Society points to a March 2009 MedPAC report that shows payments for primary care increased 10.6% between 2006 and 2009. This increase, according to the report, can be attributed largely to the work of the physician community through the RUC process. The RUC’s most recent five-year review (2007), approved by CMS, resulted in more than $4 billion in the fee schedule being shifted to evaluation and management codes from other services, including specialty care.
“Payment for many surgical services was cut again in 2008 because of an additional reduction in work values, ” added the NASS letter.
The Non-Physician Advantage
But NASS wasn’t just pointing fingers at primary care physicians.
“It pains physicians that Congress has consistently provided significantly greater payment updates to Medicare Advantage plans, hospitals, and nursing homes than to those on the frontlines providing care to Medicare patients.”
Figure 2. Medicare Payment Updates by Provider
Source: American Medical Association. Analysis of Medicare Provider Payment Updates 2004-2009.
NASS points out that, on average, physician updates are less than half of those of other providers. “These discrepancies have resulted in increasing payment inequities that negatively affect physicians’ ability to continue providing high-quality services to Medicare beneficiaries.”
For example, NASS notes that from 2004-2009, physician updates averaged an annual 0.77% increase. Over the same period, Medicare Advantage payments increased an average of 5.32%, while hospitals increased an average of 3.47% and nursing homes increased an average of 3.12%.
In 2006 and 2007, when physicians received no payment update, Medicare Advantage plans, hospitals and nursing homes received updates of at least 3% per year.
“This lack of payment consistency across providers and settings is illogical, inequitable and unsustainable, ” concluded the Society.
The Specialist’s Added Cost
NASS argues that specialists continue to lose ground in the fees while their practice costs steadily rise. Specialists go through longer training periods, accumulate more educational debt, experience more complex and higher stress of practice, work longer hours, and realize higher practice expense and liability costs.
While total Medicare spending has gone up, NASS points out those Part B expenditures, which include physician payments, have remained steady at around 20% of the total.
Further, the percentage of Medicare physician expenditures has decreased significantly from 12.9% in 2008 to 9.6% in 2011.
Figure 1. Physician Expenditures as a Percentage of Medicare Outlays
Source: Department of Health and Human Services. Historical Medicare benefits by Service Data. CMS Budget in Brief Documents 2005-2011.
Hospitals on the other hand, account for approximately 33% of the total Medicare budget and, according to NASS, “have escaped the formulaic approach to payment, resulting in continued positive annual payment updates.”
The NASS “Fix”
NASS wasn’t just complaining about being sent to the back of the payment bus, they offered a “fix of their own.”
“NASS proposes that as physician payment transitions into a value-based system (3-5 years), the SGR formula be replaced by a formula based on the Medicare Economic Index (MEI).”
The Society points out that the CBO projects that the MEI will remain relatively stable from 2012 through 2019 and range from 1.0% to 2.7%. “Replacing the SGR with [the MEI]…would reimburse physicians in a manner that more accurately represents the cost of providing care.”
As an alternate, NASS says physician payments could be updated based on changes in Gross Domestic Product (GDP), with the addition of a fixed percentage increase to ensure payment fairness.
For example, they cite President Obama’s recently proposed GDP plus 0.5% as a reasonable target for growth of total Medicare expenditure.
More Accurate Cost Accounting
NASS believes that a target that uses combined Part B expenditures is too crude an instrument to develop meaningful information on costs and precludes policymakers from accurately assessing various items with different annual growth rates within Medicare Part B, such as diagnostic imaging, laboratory and outpatient hospital expenditures. They argue that a combined target eventually results in mandatory reductions in formulaic physician payment, without regard to the cause of increased expenditures.
If a target is to be used, it should be strictly limited to the immediate prior year professional physician payment expenditures. NASS believes this will provide a more accurate accounting of physician expenditures and could lead to more careful analysis on various subgroups within the physician workforce.
There are a lot of moving parts in Washington over federal debt, budgets, deficits, the future of Medicare and a slow moving train on its way to the Supreme Court to decide whether or not the most significant healthcare legislation since the 1960’s will pass constitutional muster. We applaud NASS for inserting some order into the chaos.
