Medicare panel recommends 1% physician pay boost in 2012

Physician organizations urge Congress to prevent an estimated 29.5% drop in Medicare payments next year under the sustainable growth rate formula.

By Charles Fiegl — Posted March 21, 2011

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Lawmakers should increase Medicare payment rates to physicians and prevent a massive across-the-board cut set for 2012, the Medicare Payment Advisory Commission recommended in its annual March report to Congress.

The commission suggested a 1% increase in doctor pay in place of the scheduled reduction. The report was released March 15, days after the Centers for Medicare & Medicaid Services projected that doctor pay faces a 29.5% cut next year under the sustainable growth rate formula.

The MedPAC recommendation is not binding on Congress, although lawmakers sometimes use the advice as a starting point for congressional negotiations on preventing upcoming pay cuts. The 2012 reduction is the largest that physicians have faced to date.

"The AMA concurs with MedPAC's conclusion that the nearly 30% cut built into Medicare's payment system for 2012 would jeopardize access to physician services for many patients and should be replaced with a positive update to help offset increases in practice costs," said American Medical Association President Cecil B. Wilson, MD.

"The current Medicare physician payment formula is broken, and the AMA will work with MedPAC and policymakers on both sides of the aisle to replace it with a system that better reflects the costs and practice of 21st century medical care and provides stability for physicians and their Medicare patients."

Part of the budget battle

But boosting Medicare rates might prove difficult as a divided Congress continues to quarrel over federal spending levels. MedPAC's recommendation is designed to maintain enough cost pressure to encourage efficiency, limit out-of-pocket costs for patients and keep the Medicare program sustainable, the report said.

Freezing Medicare payments for 10 years would cost the federal government more than $275 billion, according to the Congressional Budget Office. MedPAC estimates that a 1% update in 2012 alone would boost federal spending by more than $10 billion over five years.

The Medicare physician fee schedule last received a positive update in 2010, when Congress increased payments by 2.2%. Other times since 2002, lawmakers froze doctor pay or implemented more modest updates. Several times, Congress allowed cuts to take effect temporarily before retroactively patching pay rates through temporary legislation.

MedPAC Chair Glenn Hackbarth appeared before the House Ways and Means health subcommittee on March 15 to discuss the annual report. The commission plans to draft recommendations for SGR reform within the next six months and vote on proposals in October, Hackbarth said. MedPAC is concerned that uncertain pay rates will threaten access to care.

"We don't see wide-scale evidence of that right now," Hackbarth said. "Our concern is that repeated difficult process of trying to avert large-scale cuts to physician payments -- doing that over and over, sometimes multiple times in the same year -- the cumulative effect of that exercise is undermining physician and beneficiary confidence in the Medicare program."

Health subcommittee Chair Wally Herger (R, Calif.) said there is bipartisan agreement that the SGR is a major concern. Addressing Medicare physician payment is a high priority for the panel, he said.

"Overall, there is enough money in the physician fee schedule," Hackbarth said. "Medicare pays enough for physician services overall to ensure adequate access for Medicare beneficiaries. However, we are concerned about how that money is distributed."

For example, in 2007, some specialists received compensation that averaged twice the compensation for primary care physicians, the report states.

MedPAC highlighted four fee schedule changes, such as increasing the physician work portion of certain relative value units, that have increased pay rates for primary care services by 22.5% since 2006.

The American Academy of Family Physicians praised the recommendation of a 1% update and the statements in the report about more accurate payments for primary care physicians, said AAFP President Roland Goertz, MD. However, AAFP is concerned that a small segment of the Medicare population continues to report problems finding primary care physicians. The report states this is a "serious concern" for the continued functioning of the health care system.

MedPAC concludes that Medicare spent $64 billion on physician and other health professional services in 2009, the most recent year for which the data are available.

The amount represents 13% of total Medicare spending and 20% of the fee-for-service program. On average, MedPAC says, Medicare rates are equal to 80% of commercial payments for the same services, a figure consistent for a decade.

Patients still have access

Despite relatively stagnant physician pay rates, the report states that patient access to doctors remains good.

In a 2010 patient satisfaction survey, 75% of Medicare patients reported never having to wait longer than anticipated for appointments for routine care. That compares favorably with 72% of patients between the ages of 50 and 64 with private insurance who said they never had a problem scheduling appointments with doctors.

Finding a primary care physician proved to be more difficult on the whole for patients with private insurance than for patients on Medicare, the survey found.

But physician organizations warned that the access situation would change rapidly if the 2012 cut projected by CMS were allowed to take effect.

"The new estimate from CMS should serve as a wake-up call to Congress that physicians who serve Medicare and Tricare patients are facing a debilitating cut of nearly 30% on Jan. 1," Dr. Wilson said. "This cut is the highest ever scheduled under the broken Medicare physician payment system, and it threatens access to care for our nation's seniors, military families and the baby boomers now entering Medicare."

The Association and 130 other organizations and state medical societies sent a March 10 letter urging Congress to fix the payment formula permanently. The groups want to eliminate the SGR and avoid more of the type of short-term patches that have become more prevalent on Capitol Hill. In 2010, Congress enacted five temporary measures -- two for one month, two for two months and one for six months -- to stave off Medicare pay cuts before finally approving a year-long measure to freeze 2011 rates at 2010 levels.

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The cost of delay

The longer Congress goes without approving an overhaul of the Medicare physician payment formula, the more costly long-term reform becomes for lawmakers. The estimated 10-year costs (in billions) of freezing physician payments alone -- with no increase in rates -- has risen significantly in recent years.

2005 $48.6 billion
2006 $127.2 billion
2007 $177.7 billion
2008 $220.1 billion
2009 $246.9 billion
2010 $275.8 billion

Source: Congressional Budget Office

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Access to physicians unimpeded

Despite continued uncertainty over Medicare physician pay rates, access by program beneficiaries remains good compared with people age 50-64 who are privately insured, MedPAC finds in a 2010 patient survey:

How often? Medicare Private insurance
Delays in getting routine care appointments
Never 75% 72%
Sometimes 17% 21%
Usually 3% 4%
Always 2% 3%
Delays in getting appointments for illness or injury
Never 83% 80%
Sometimes 13% 15%
Usually 2% 2%
Always 1% 2%
Finding a new primary care physician
No problem 79% 69%
Small problem 8% 12%
Big problem 12% 19%
Finding a new specialist
No problem 87% 82%
Small problem 6% 11%
Big problem 5% 6%

Note: "Don't know" or refused responses are not presented.

Source: "Report to the Congress: Medicare Payment Policy," Medicare Payment Advisory Commission, March (link)

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External links

"Report to the Congress: Medicare Payment Policy," Medicare Payment Advisory Commission, March (link)

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