Medicare Doctor Reimbursement Battle Heats Up in Earnest

Among the many embattled parts of Medicare's reimbursement system, doctor payments have been perhaps the most contentious. Doctors have been fighting Medicare's attempts to cut payments for years.

          Because of their political clout, they've mostly succeeded in delaying the so-called "doc fix," or Sustainable Growth Rate (SGR), which would limit the amount paid to doctors each year. Now, though, skirmishes are spreading throughout the country as doctors claim they should be paid more based on where they practice.

          The latest salvo from the medical profession appeared in the American Medical Association's (AMA) online newspaper, American Medical News.

          Doctors have been arguing for years that their payments from Medicare have been too low, particularly in high-cost urban areas. Even the "geographic adjustments" that Medicare has come up with to better reflect higher practice costs in states like California and New York and major metropolitan areas have come under fire from the AMA as being outdated.

          Medicare must tread carefully on this issue, however, because if it pegs reimbursement rates too low in rural areas, it runs a greater risk of losing doctors where they are in short supply.      

The California Medical Association (CMA) has argued for Medicare geographic payments to be based on actual market costs. The association, which represents physicians in both rural and urban areas, said any payment changes should more precisely reflect the costs of running a practice from each type of locale. “The current system is outdated and not distributing payments accurately,” said CMA President James G. Hinsdale, MD. “A great example is San Diego, a county that is still designated as rural and clearly is not. Our belief at CMA is that payment accuracy will help to improve seniors’ access to care in these underpaid regions.”

          Both the Institute of Medicine (IOM) and Medicare Payment Advisory Commission (MedPAC) have explored this subject in detail. MedPAC, for example, recently voted to keep most of the geographic-based system in place except for "floors," or baselines, of the formula, which will expire at the end of the year.

Aligned with a similar goal to provide more accurate payments to doctors, the IOM recommended this summer that the formula be tweaked as part of a two-phase study mandated by the Affordable Care Act (ACA):  

"The report…recommended a number of changes, including using the same geographic boundaries and payment areas for hospitals and health care practitioners; using different data sets for computing the compensation of clinical and administrative hospital staff and those at office-based sites; and expanding the types of occupations used to make the geographic adjustments. This latter change was recommended so that, for example, the full range of occupations employed in physicians’ offices would be included in calculating the geographic adjustment, rather than a few select occupations."

          The IOM study authors concluded that, if their changes were put in place, it would result in "less than a 5 percent change—increase or decrease—in Medicare payments to most hospital and practitioner services." View the complete IOM Phase I report and Phase II report here.

          One of the broadest IOM recommendations expands the map for geographic-based payments from 89 to 441 regions. This would allow for a more accurate accounting of costs in urban areas. Many of these areas have expanded to multiple counties that were originally deemed rural when Medicare first adopted the system in 1997.

          For example, metropolitan Atlanta, San Francisco and several cities in Florida and Texas have expanded dramatically over the past 20 years. Areas that were once farm fields are now part of a suburban megalopolis that have the higher costs of offering health care in an urbanized region. An expanded number of geographic pricing zones may better reflect medical costs in those areas.

Finding a Compromise

          There are few doctors who openly admit that they are willing to accept lower reimbursement from Medicare. Quite understandably, they are facing high overhead costs associated with private insurance companies, new regulations from the ACA and trying to keep pace with the latest medical advances.

          Their situation is currently being debated by Congress right now, which realizes that it needs to cut spending to make the program's fiscal outlook more sustainable, but it doesn't want to harm large constituencies or patients.

          One key to reaching a reimbursement compromise is to find an index upon which to base future doctor payments. The often-criticized health care component of the Consumer Price Index, compiled by the Bureau of Labor Statistics, may not truly reflect doctors' expenses. Since medical expenses have been rising faster than the Gross Domestic Product, that gauge of overall economic activity may not be right, either.

          Access to health care is also a critical issue. Rural areas need to keep the few doctors serving these populations, and changing the payment rules may further restrict access for seniors and disabled citizens who can't travel long distances for care.

          Still, the overall push to rein in doctor payments without a balanced approach isn't going to be well received in the medical community. Neurologists nationwide, for example, are fighting Medicare on a plan to cut reimbursement for certain diagnostics. In the past, the system allowed neurologists to bill for each nerve they tested. 

          Through a partnership with MedPAC, the Department of Health and Human Services and an academic council of leading health care economists, the doctors' groups should come up with their own index that could become the baseline for the SGR. Perhaps a non-partisan, independent body comprised of doctors, academics and Medicare could review Medicare payment methods. Would this duplicate the work of MedPAC and the IOM? Not if it had some power to adjudicate or arbitrate payment plans.   

          Perhaps this partnership can find some middle ground and then submit their findings to Congress so that future legislation can find a compromise that's fair to doctors while making Medicare more sustainable. 

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