May 2002 • Volume 8 • Number 5 |
Physicians' Medicare payments could drop by nearly 20 percent during the next four years if nothing is done to remedy the sustainable growth rate-based formula the federal government uses to calculate those payments.
This year, physicians were hit with a 5.4 percent cut in the conversion factor used to update their payments for Medicare services. The Medicare Payment Advisory Commission has warned that next year's cut could be 5.7 percent. MedPAC released its projections during its March meeting. Another 5.7 percent cut is expected in 2004, followed by a 2.8 percent cut in 2005.That would push physician payments back to the 1993 level, despite rising practice costs.
"Those future cuts would be devastating to our doctors," said AAFP Executive Vice President Douglas Henley, M.D. "What's even more critical is the adverse effect these cuts would have on patients' access to Medicare services."
Academy President Warren Jones, M.D., of Ridgeland, Miss., took that message to Congress April 10 when he testified on the issue before the House Small Business Committee.
"The gap between cost inflation and Medicare's payment updates is already starting to take its toll," Jones testified. "In the last year or so, access problems have been reported in Atlanta, Phoenix, Albuquerque, Annapolis, Denver, Austin, Spokane, northern California and Idaho."
"AAFP data from last year reveal that 17 percent of family physicians who responded to our practice survey are not accepting new Medicare fee-for-service patients," Jones testified. "Given the recent and projected cuts in Medicare reimbursement, we have reason to expect that the number of physicians not accepting new Medicare patients will climb."
Back at the AAFP, Henley said most primary care practices are in effect small businesses, and many already are losing money due to Medicare payment cuts and inflation. "What the projected cuts don't take into account is the additional negativity of inflation on physician income. It's simple: You can't run a small business when you're losing money," he said.
Compounding physicians' financial problems this year is the aftermath of a national tragedy -- the Sept. 11, 2001, terrorist attacks, said AAFP Director Arlene Brown, M.D., of Ruidoso, N.M., and family physician Ronald Johnson, M.D., of Pittsfield, Ill. (see story "Lower payments force FPs to risk personal loss for their patients, practices").
Why? The processing of physician reimbursements by private health insurers slowed to a "snail's pace" after Sept. 11 because insurance companies were inundated with attack-related claims, they said. Physician payments normally processed within 30 days now are taking around 120 days to settle.
In his congressional testimony, Jones warned that if practices close because of these factors, some rural communities could face economic hardship. This is because the presence of a family physician in a community is an economic stimulus. He cited a study by the Center for Health Policy Research at the Oklahoma State University Health Sciences Center that found "on average, each family physician will generate (both direct and secondary) an estimated 50 full-time jobs, and these jobs will generate more than $1.1 million of income annually."
Continuing efforts in Congress to repeal the SGR-based physician payment formula advanced when Reps. Nancy Johnson, R-Conn., and Bill Thomas, R-Calif., included MedPAC's projected payment levels in a letter they sent in late March to Thomas Scully, administrator of the Centers for Medicare & Medicaid Services.
Earlier in March, Johnson introduced a bill, H.R. 3882, which would enact recommendations MedPAC released in December 2001.
Those recommendations would change the 2003 conversion factor to a positive 2.5 percent and eliminate the SGR-based formula beginning in 2004. The final recommendation would revise the productivity adjustment for physician services by using multiple factors -- including costs for office space, medical materials, supplies and equipment -- instead of labor only.
However, an estimated $126 billion would be needed to implement those changes during a 10-year period. Capitol analysts believe President George W. Bush is willing to fix the physician reimbursement problem but insists on a "budget-neutral" plan.
Henley said, "The Academy is working diligently and aggressively to convince Congress the SGR-based formula needs to be fixed -- even if it means the government must spend more money." AAFP leaders and members pressed the issue during April visits to legislators on Capitol Hill. And the Academy is working with a coalition of other medical organizations, including the AMA, in continued lobbying efforts, Henley said.
"Congress needs to understand how the current pay formula adversely affects the entire Medicare system and produces results opposite of what Medicare is all about," he said.
FP Report is published by the
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Copyright © 2002 by
American Academy of Family Physicians.