Thursday, April 15, 2010


Medicare Debacle Update

Although the Sustainable Growth Rate (SGR) Formula for Medicare payments to physicians was acknowledged as flawed many years ago, it has never been fixed. It was designed to keep payments in line with a number of economic growth factors, to keep physician payments at a stable economic level. Although the formula worked for the first year, it subsequently failed: the physician fees began to fall while expenses rose and buying power fell. The legislators saw the problem and froze the Medicare fee schedule, but failed to fix it. For the past several years, as the freeze expires, the legislators have voted to continue the freeze for another twelve months. This year they voted to stay the fee drop by only a month, anticipating that it would be permanently fixed by the massive health care reform package. The drop for 2010 was now up to 21.2%!

Well: the health care reform package failed to fix the SGR problem. After a month they voted to stay the drop for another two months. On April 1, they failed to stay the drop. CMS, the Medicare administration, held all payments for two weeks, thinking that the legislature would retroactively stay the drop. After much legislative wrangling, they failed to do so yesterday, April 14, so today, the 21.2% fee reduction goes into effect. CMS has not announced their plans. They have two choices: start paying at the reduced rate retroactive to April 1st, or continue to not pay at all.

For physicians there are three possibilities: drop out of Medicare (effectively ceasing care for all over 65), accept the situation and suffer dramatic decline in income, or raise fees for everyone else to compensate for the lost income.

My practice is one-third Medicare patients, but they represent half of my fees. Sixty percent of my fees go to overhead. A twenty percent drop in Medicare fees translates to a fifty percent reduction on my actual Medicare income. To compensate I will need to raise all the rest of my fees by twenty-five percent. The fee discrepancy between the Medicare and non Medicare groups will widely diverge. What was an $80 fee for both groups becomes $60 for Medicare and $100 for all others. (For pediatrricians the effect is nil. For a gerentologist, the effect is without recourse.)

I believe that the lack of media attention to this debacle is really very scary. That the legislators have for years failed to fix this problem that hey all acknowledge as flawed is far more than just shameful, it is incompetent.

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