Congress Allows Medicare Physician Scarcity Incentives to Expire

Congress allowed a Medicare bonus payment program to expire at the end of June, resulting in a 5 percent reduction in Medicare payments for nearly 25,000 primary care physicians -- including about 13,000 family physicians -- who practice in federally designated physician scarcity areas, or PSAs, according to the AAFP's Robert Graham Center in Washington.

Under the program, the federal government had been paying Medicare physicians a 5 percent bonus each quarter for practicing in areas of the country designated as PSAs. That bonus provided an incentive for the 25,000 primary care physicians and about an equal number of subspecialists to practice in underserved parts of the country, said Robert Phillips, M.D., M.S.P.H., director of the Graham Center. Without the program, physicians may not want to remain or locate in these areas, potentially undermining access to care for as many as 7.5 million Medicare beneficiaries who rely on these physicians for their treatment, according to an analysis conducted by the Graham Center.

Congress allowed the bonus payment to expire without any fanfare or recognition, said Phillips, adding, "I think Congress did this out of ignorance. They didn't know who it would affect or how badly it would affect them."

FP Howard McMahan, M.D., who runs a solo practice in the rural town of Ocilla, Ga., said he feels betrayed by Congress' failure to renew the incentives.

"We really felt Congress would act appropriately and keep these incentives going," said McMahan, who treats more than 200 patients during a given work week, half of whom are Medicare beneficiaries.

"I have practiced in rural underserved areas since leaving medical school, and I trained specifically in family medicine to practice primary care in a small town," said McMahan. "That was my goal and what led me to go to medical school."

McMahan said it has been difficult to recruit other physicians to practice in Ocilla because of a lack of adequate resources and support. The PSA incentives, he said, were "one way to help cover our difficulties from a financial standpoint," making it possible to maintain adequate staff and to employ the latest technology.

"For some of us who are left out on a limb without much stabilization from the tree trunk behind us, Congress has just proven they are not willing to be a stabilizing factor," McMahan said.

Congress enacted the PSA incentives as part of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, (415-page PDF; About PDFs) and CMS started paying the bonuses in 2004. Although it is difficult to measure the impact of the incentives because of their limited lifespan, a Graham Center analysis compares the first two years of the incentives to the two years immediately before CMS initiated the bonuses. That analysis found an increase in the number of subspecialists moving into scarcity areas -- presumably as a result of the bonuses, Phillips said.

"With primary care, we didn't show that the difference was significant, but we did show that it was moving in the right direction -- that it was increasing," said Phillips. Now, however, the loss of the PSA bonus "may make it difficult for physicians to keep their doors open to Medicare in some of the nation's most underserved areas," he added.

HHS, meanwhile, withdrew a proposed rule on July 23 that would have consolidated health professional shortage areas, or HPSAs, and medically underserved areas, or MUAs, into a single new methodology called the Index of Primary Care Underservice. Had it been enacted, the proposed rule would have stripped 600 areas of their HPSA status while de-designating more than 900 MUAs, creating new health care shortages and exacerbating existing ones, according to an analysis by the Graham Center.