Health Care Reform Update: Thanks to Republican Senator, Medicare Cuts Physician Payments 21%

Care Reform Update: Thanks to Republican Senator, Medicare Cuts Physician Payments 21%

imageby Alta Price, M.D.

Thanks a lot, Senator Bunning (R-KY), for the 21.2% decrease in Medicare payments that went into effect on Monday, March 1, 2010!

The Democrats in Congress have been working to permanently fix the flawed Medicare Sustainable Growth Rate formula (see below) that determines physician payments under Medicare. The House has already passed a permanent fix, but the Senate has not.

To stave off the cuts while details of a permanent solution are worked out, the House passed a one month fix. But in the dysfunctional Senate all it takes is one Republican Senator to foul up the works. Objecting to the $10 billion the measure would add to the deficit, Senator Jim Bunning of Kentucky blocked it. (The measure also included things like the extension of unemployment benefits and COBRA subsidies. I’m sure the 10.7% of Kentuckians who are unemployed won’t be any happier with their Senator than Kentucky’s physicians.)

The Administration came to the doctors’ rescue by ordering Medicare billing contractors not to pay claims for the first ten business days of March, hoping Republicans come to their senses in that time.

Nonsense like this is one reason many physicians are suspicious of government-run health care programs. One reason the AMA liked the House bill, and endorsed it, is because it included a permanent fix to the flawed SGR formula the government uses to decide what to pay physicians.

Since this is in the news, and included in health care reform, I’ll try to give a simplified explanation of this complex issue. I also recommend this article from Medscape Medical News – “House Passes Medicare SGR Fix”.

Adjustments to Medicare payments to physicians (and other providers) are based upon a formula called the Sustainable Growth Rate (SGR). This was passed by Congress in 1997 and uses 1996 as a baseline for physician fees. Physician spending was not allowed to increase faster than the GDP (there are some other adjustments). But no allowance was made for more expensive technology, additional services covered by Medicare, and huge increases in drug costs (drugs provided in physician offices are included in the SGR formula).

So going back to 1996, there is a cumulative “target” amount of spending for physician services based on the SGR and a cumulative actual amount that has been spent on physician services. Starting in 2002, the SGR formula called for physician fee schedule cuts every year. But every year Congress intervened to block the cuts or give physicians a modest increase in fees. So every year since 2002 the cumulative amount Medicare has “overspent” on physician services has increased, and therefore every year the SGR calls for more drastic cuts. By 2016 the fee cuts will be 40%. Since practice costs are actually going up, not many physicians will be able to take care of Medicare patients at those rates.

Here is a nice graph showing actual practice costs, Medicare payments, and what will happen to Medicare payments if the SGR is not fixed.

One reason Congress has not fixed the problem is because the discrepancy between the target and actual physician spending has become so large – well over $200 billion. Under PAYGO (pay-as-you-go) rules you need to find ways to offset that cost. And when the CBO scores the health care reform bills, it includes fixing the SGR in the costs.

Although the original health care reform bill in the House included the SGR fix, the added $210 billion pushed the 10 year cost of the entire bill over $1 trillion. The House ended up taking out the Medicare SGR fix and passing it as a separate bill (H.R. 3961).

The Senate health care reform bill only includes a one year SGR fix, which made their bill cheaper. But it does nothing about the ongoing problem which will result in severe cuts in payments to physicians taking care of Medicare patients. The House SGR fix bill went to the Senate to die, along with so much other good legislation. Sigh.

I found this fact sheet about the Medicare SGR from the American Academy of Dermatologists helpful, and recommend it if you want more details.

P.S.  On tonight's Fallon Forum (Tuesday, March 2), Dr. Charles Goldman will discuss health care. Over the past couple weeks, there have been lots of new developments in the ongoing effort to reform America's health care system, and Charles' perspective as a cancer specialist and surgeon is an important one. Please join The Fallon Forum from 7:00 – 8:00 pm on 98.3 WOW-FM, or livestream at (pod-casts available). Call-in at (515) 312-0983 or (866) 908-TALK.  And please spread the word!

Price is a physician practicing Pathology in Davenport, Iowa. One of
the original Deaniacs, she stays involved with Democracy for America,
Iowa, and the Quad Cities. She advocates for quality, affordable health
care for all, primarily as a volunteer with Progressive Action for the
Common Good
(Health Care Reform Issue Forum).
  Watch for Dr. Price's Health Care Reform Update every Tuesday here on Blog for Iowa.  E-Mail Alta Price

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6 Responses to Health Care Reform Update: Thanks to Republican Senator, Medicare Cuts Physician Payments 21%

  1. Anonymous says:

    I have worked for 45 years plus in the medical field and can tell you if this 21% cut happens – you may find yourself in the emergency room needing
    surgery but can't find a physician that will care for you.
    Most practices as we know it now will close or will not be able to keep the
    staff they now have etc. etc.
    Look around is the physicians you know of getting rich from medicare or
    We are at the end of health care as we know it.


  2. Anonymous says:

    In communities across America, the major providers of health care (doctor’s offices and health systems, to include Mayo Clinic, Scottsdale) are refusing to see new Medicare patients.
    Why might this be? Reasons include costly Federal regulations, time-consuming documentation requirements, the potential for monetary penalties for “improper” patient management. And, effective March 1, 2010, the Centers for Medicare and Medicaid Services (CMS) plans a 21.5 % reduction in payments to all physicians as well as an additional 6% cut in payments to Cardiologists and Oncologists. NEARLY 30%! The proposed cuts relegate our Medicare patients to a payment status less than that afforded by Public Aid!
    Current regulations and extreme payment cuts will impact the ability of your doctors to deliver the care which you and your families are accustomed to. Is this not news?
    Think on this:
    If 10% of the doctors in your area decline Medicare patients, that’s 10% more patients to be seen in already crowded ER’s.
    If 5% of all foreign doctors (50% of the workforce; topped only by the migrant work force) return to their country of origin, that’s another 5% of patients to the ER’s.
    If 5% of all senior doctors retire rather than take a 21% reduction, that’s another 5% patients to be seen in the ER’s.
    The ER’s will be stuffed. This country is about to see a REAL healthcare crisis!
    Those who have served the country and grown up with a work ethic are about to be abandoned by the government they have supported over the years. The Healthcare System, the patients, and the ER’s can’t live on less.
    As an aside: I tell my own patients that as a physician, I can not place a dollar value on my services. However, I can place a value on a pizza, on theater tickets, on World Series tickets, or on a cruise.


  3. Anonymous says:

    Sen. Bunning should be ashamed. It is anstonishing (maybe not) that this will be the capstone to his career in the Senate.


  4. Anonymous says:

    Thank you, everyone for your comments. We don't get a lot of comments here at BFIA, so I am not very good at checking back in.
    Now that Senator Bunning backed down, and the measure passed, let's hope Congress gets this resolved before the end of the one month freeze on the physician pay cuts.
    Alta Price


  5. Anonymous says:

    One reason Congress has not fixed the problem is because the discrepancy between the target and actual physician spending has become so large – well over $200 billion. Under PAYGO (pay-as-you-go) rules you need to find ways to offset that cost.


  6. Anonymous says:

    President Obama signed a legislation on March 23, 2010, to overhaul the nation's health care system and guarantee access to medical insurance for tens of millions of Americans.
    The health care law seeks to extend insurance to more than 30 million people by expanding Medicaid and providing federal subsidies to help lower and middle-income Americans buy private coverage.


Comments are closed.