Cuts in Medicare reimbursement to doctors may limit access to health care for seniors

By Fred Gray News-Review Staff Writer

Without congressional action, reimbursement from Medicare to physicians nationwide will be reduced by 10 percent in January, with cuts predicted to rise to 40 percent by 2016.

While that’s not good news for physicians, it may be even worse news for seniors and the disabled, whose access to Medicare treatment stands to be curtailed as physicians refuse to accept new patients.

The problem is even more widespread, as physician reimbursement rates for TRICARE, which covers veterans and military families, and many private insurance companies, are tied to Medicare rates.

And an American Medical Association (AMA) survey revealed that 60 percent of physicians nationwide reported that they would have to limit the number of new Medicare patients they treat if next year’s cut is put into effect.

Northern Michigan

The problem is particularly acute in Northern Michigan, with its relatively large numbers of seniors and physicians who specialize in treating them.

Some area physicians told the News-Review they will continue to cut costs while trying to maintain services to the community out of a moral commitment. But they say they can do so only so long before continued cuts in reimbursements and increasing costs of operating their practices will force them to make significant changes.

Several single practitioners, who have to take on costs that are more evenly shared in group practice, say they are near the breaking point.

Todd Decker, who practices at Bayside Family Medicine in Petoskey, said Medicare patients have the greatest health care needs and require a great deal of his time, often up to 50 percent of his day.

“It will be really difficult to continue as we have with the cuts in Medicare reimbursement,� he said. “I have already had to limit the scope of my practice by the amount of time I can devote to my Medicare patients.�

“If we get the 10 percent cut I won’t close my doors to my current Medicare patients but I can’t take on any more,� Decker said.

The AMA says the cut will put physician reimbursement back to what it was in 2001 even while costs of operating their businesses continue to rise.

Dermatologist William Gray (who is the brother of News-Review Staff Writer Fred Gray) of Cheboygan said that with next year’s scheduled cut of 10.1 percent and an inevitable rise in expenses, access to health care for seniors in the area could be in jeopardy, despite the best will of physicians.

“Medicaid patients — under the program for low income patients administered by the state — have seen this happen for quite some time,� he said.

“Medicare and TRICARE patients need to be informed as to what is going on nationally. Locally, I hope that patients’ access to health care will not be affected anytime soon. But with the anticipated cuts, access to health care might well be curtailed for some.

“I feel that everyone needs to be informed so that people have an opportunity to have a say in health care politically, as it will affect all of us in one way or another. The more that we all talk together about health care, the more we can come to a consensus.�

AMA recommendations

Ron Davis, a Michigan resident who is president of the national American Medical Association, said physicians in rural areas are often hurt more severely by Medicare cuts than in urban areas because their reimbursement rate may be lower to begin with, and they may be suffering from Medicaid cuts and higher liability insurance premiums.

He said that in addition to limiting access to health care, some physicians in rural communities may not be able to give salary increases to their staff, who end up being overworked and underpaid, or decide to leave, with vacancies going unfilled, and their practice begins a downward spiral.

“There are many different ways the impact may be felt,� he said. “Some may simply decide to retire. Around 40 percent of physicians are 50 and older. Many are at a point where they can consider cutting back or retiring early.�

He said Michigan has a shortage of physicians, and “we don’t want to push them into retirement.�

Instead of cutting reimbursement rates, the Medicare Payment Advisory Committee has recommended that Congress increase payment rates by 1.7 percent in 2008 — in line with the estimated practice cost increase.

According to the AMA, the Medicare physician payment update formula is producing disastrous effects. In addition to generating the pending steep pay cuts, the formula:

— Has kept average 2007 Medicare physician payment rates about the same as they were in 2001;

— Prevents physicians from making needed investments in staff and health information technology to support quality measurement;

— Punishes physicians for participating in initiatives that encourage greater use of preventive care in order to reduce hospitalizations;

— Has led to severe shortfalls in Medicare’s budget for physician services that have driven Congress to enact short-term interventions with funding methods that have increased both the duration of cuts, as well as the cost of a long-term solution; and

— Hurts access to care for America’s military families, as payment rates in the Department of Defense’s TRICARE program are tied to Medicare rates.


Earlier this year the U.S. House passed and Congressman Bart Stupak voted for legislation that would have addressed the problem of Medicare cuts to physician reimbursements for the next two years.

The Senate has not yet passed companion legislation.

Stupak aide Alex Haurek said Stupak “will continue working to prevent Medicare reimbursement cuts so that seniors and Medicare beneficiaries in Northern Michigan can continue to have access to quality health care.�

The Senate is reported to be putting together a package that ranges from one-year freeze in Medicare reimbursements to physicians to 2 years of positive updates.

But Shawn Martin, head lobbyist for the American Osteopathic Association, said he believes there is a “strong chance� the 10 percent cut will take effect, with the Senate working in the early part of next year to pass retroactive legislation.

“The Senate has a lot of work to do,� Martin said, adding that even if Congress passes legislation it will still have to survive a presidential veto.

Stabenow view

Last year Debbie Stabenow, Michigan’s junior U.S. senator, argued that if Congress did not act to undo the 5 percent cutback for 2007, “we will destabilize the Medicare system and put all patients’ access to health care at risk. And that is really not an understatement.�

She cited an AMA survey that said if the scheduled cuts went into effect 50 percent of doctors will defer purchase of health information technology which would result in savings of hundreds of billions of dollars to the federal government.

“But you cannot tell a physician who is trying to make ends meet to be able to continue to serve people that, ‘By the way, we’re about to cut your payments coming in, but we want you to buy new hardware and new software and train people and do all of these other things for health information technology, so that the federal government can save dollars.’ It doesn’t make any sense.�

Then, focusing in on rural communities, such as those in her native Northern Michigan, Stabenow said:

“We know that 37 percent of doctors practicing in rural communities will be forced to discontinue Rural Outreach. And 43 percent of physicians will decrease the number of new TRICARE patients that they serve.�

Stabenow said that when Congress cuts payments to provide health care, businesses see their health insurance rates go up.

“The private sector ends up paying for all of this, and it does not save money to cut physicians’ payments or other Medicare or Medicaid payments,� she said.

Cheboygan surgeon

In her speech Stabenow cited Timothy Burandt, who practices surgery in Cheboygan.

She said Burandt wrote her a letter that said:

“In 1982 I graduated from medical school and took an oath to care for all patients in need. As a general surgeon practicing in rural Northern Michigan, I’m committed to caring for all of my neighbors, not just those with insurance. My expenses keep going up as I also have a responsibility to my staff to support them with fair wages and benefits. Without adequate reimbursement, I cannot continue to offer my services to everyone who walks through my door. There simply aren’t enough resources. Please don’t force me to choose which patients I should care for. I would rather retire early and close my practice.�

Then Stabenow said, “I don’t want Dr. Burandt to have to close his practice in Cheboygan, Michigan. The families in Cheboygan cannot afford to have him close his practice.

“There is no excuse for us not to act so he doesn’t have to do that.�

The same scenario is in play for 2008, only the scheduled cuts to Medicare reimbursement are twice as large.

Family practice

John Everett, an osteopathic family practice physician in Indian River, said costs of maintaining a medical practice are increasing twice as fast as Medicare reimbursement, which is scheduled to be cut by 40 percent in the next eight years.

“The only way to deal with that is to cut Medicare benefits and limit access to health care. We’ll just end up treating the worst problems people say they are having,� Everett said.

He said Medicare patients represent the highest percentage of his practice, with Medicaid patients high as well. He said he will continue to treat his Medicare patients “but will have to figure out how to do it.�

“I’ll treat them it as long as I can,� he said.

Asked what he sees for the future, Everett said: “This will get to a crisis state, and will get the attention of the next group of politicians, who will come in to save the day.

“We need to try to make a sustainable, predictable, equitable Medicare payment to physicians that rewards good health care and good outcomes, and that will help reduce the other part of Medicare (Part D, voluntary prescription drug coverage).�

Everett said Medicare is like a “drowning person.�

Asked if he foresees the current crisis ending in a kind of socialized medicine, Everett said: “This IS socialized medicine. The top groups are Medicare and Medicaid, and they are completely governed by the government.�

He said the bottom line is that health care costs continue to increase while the government cuts the most rapidly growing segment of the population (Medicare), which is also the most vulnerable.

“It is not looking into the future,� Everett said. “We need a responsible program that sustains that population — the best we can afford with the best practices. That’s what AMA and the AOA are recommending.� 

The hospital

Tim Jodway, CFO of Northern Michigan Regional Hospitalsaid cuts in Medicare reimbursements only affect individual physicians, and not hospitals, which come under a different schedule.

He said that in his view, the 10 percent cut in Medicare reimbursements would affect practices differently, depending on the mix of Medicare, Medicaid, insurance, private pay and charity patients.

“I would expect there will be some impact. The physicians will probably be less willing to take lower-paying (Medicaid) and charity patients.

“Even at a 10 percent cut, for a lot of doctors Medicare is paying more than Medicaid, so if they need to make up that difference, the best way for them is to see fewer low-paying patients, and those may not be Medicare.�


Gerry Chase, health officer for the four-county Northern District Health Agency, said that while the 10 percent cut in Medicare reimbursement for physicians is a “significant amount of money,� rates for Medicaid reimbursement are one-third to 40 percent less.

“It severely impacts the number of providers,� Chase said. “Independent practitioners just don’t accept Medicaid. It’s a serious problem.�

Balance Billing

With no permanent fix for Medicare cuts in sight, doctors say it makes sense to pursue a law that would permit “balance billing,� which would let them bill patients the difference between reimbursement rates and what it costs to treat patients.

In the context of Medicare the federal government, beginning in the late 1980s, has restricted the ability of physicians to “balance bill� beneficiaries for charges in excess of the copayment and reimbursement amounts approved by Medicare.

Legislative proposals tend to cast the practice in the same light as insurance fraud, with attendant civil fines and licensing sanctions.

The Law

The law provides for Medicare physician payment rates to be updated each year:

— Each year’s payment update calculation starts with the Medicare Economic Index or MEI, which is a conservative government index of practice cost inflation.

— The update is then adjusted up or down from MEI based on a national spending target called the Sustainable Growth Rate (SGR).

— The SGR was created by Congress in 1997 as a target rate of growth in Medicare spending for physician services.

— The key factors in setting the SGR are Gross Domestic Product (GDP) growth, Medicare enrollment, price changes and changes in Medicare benefits or other changes in law.

— If spending exceeds the SGR targets, then annual physician payment updates are less than annual increases in practice cost inflation, even if they produce steep reductions from current payment rates.

AMA President Davis said, about Congress’s approach to revising the SGR,: “And this pathetic yearly tourniquet approach to the SGR cuts is a perfect example of management by crisis.�

“If physicians across the country are forced out of the Medicare program, and lose trust in the program, they may become wholly resistant to any last-ditch effort by the federal government to respond to the crisis, and to restore the program to ‘business as usual,’� he said.

Spiraling Costs – No End in Sight

One possible reason for the reluctance of Congress to deal with the problems head-on, is the studies by the Congressional Budget Office (CBO) that report that unchecked, spending for health care will eventually reach unsustainable levels.

In November the CBO released a study titled The Long-Term Outlook for Health Care Spending. The study presents the CBO’s federal spending projections on Medicare and Medicaid and health care spending generally over the next 75 years.

The CBO reports that the goal of the study is to examine the implications of continuing current federal law, and finds that federal spending for health care would eventually reach unsustainable levels.

In fact, in the absence of federal law changes, the CBO projections suggest that:

— Total spending on health care would rise from 16 percent of gross domestic product (GDP) in 2007 to 25 percent in 2025, 37 percent in 2050 and 49 percent in 2082.

— Federal spending on Medicare (net beneficiaries’ premiums) and Medicaid would rise from 4 percent of GDP in 2007 to 7 percent in 2025, 12 percent in 2050 and 19 percent in 2082.
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