Analysis: Medicare pay cuts worry doctors

WASHINGTON, July 3 (UPI) -- Proposed cuts in Medicare payments for 2008 have some physicians worried.

The Centers for Medicare and Medicaid Services announced the suggested 9.9 percent reduction in payments on Monday, along with other policy change proposals.

CMS calculates payment fees for Medicare -- the federal government's health insurance plan for those over 65 years old and some younger, disabled individuals -- based on a sustainable growth rate formula specified in the 1997 Balanced Budget Act. From 1999 to 2001, the calculation resulted in positive growth, but every year since then has yielded a decrease in payments.

However, Congress has intervened for the past six years to keep payments from going down, and since 2004 policymakers have set the updated rates by statute.

The proposal also includes provisions to increase efficiency and reflect the quality of care in the prices paid for it. Before any of the suggested changes are made, CMS will consult with interested groups, said acting CMS Administrator Leslie V. Norwalk.

"CMS will continue working with Congress as well as physician groups to identify payment methods that help improve the quality and efficiency of care in a way that is cognizant of the costs to taxpayers and to Medicare and its beneficiaries," Norwalk said in a statement.

If Congress allows the payment cuts to go into effect this year, some physicians worry about the strain it would place on their practices.

"It would be difficult, if not impossible, for any small business to absorb continued fee cuts in the face of increasing costs for staff, office space and other business expenses," said Brian Whitman, senior analyst for regulatory and insurer affairs at the American College of Physicians, a national society of medical specialists.

Rural physicians would be hit particularly hard, said Tim Fry, government affairs manager for the National Rural Health Association, a nonprofit membership organization that promotes rural health issues.

"For rural providers it could be disastrous," Fry told United Press International.

Physicians in rural areas already face a financial setback this year, when a Medicare provision expires that ensures physicians in all geographic areas receive no lower than a specified amount for treatment. Without that provision, rural physicians tend to receive much lower Medicare payments than those practicing in cities, Fry said.

"It's kind of a double whammy," he said.

Others argue Medicare beneficiaries will be the ultimate victims because fewer physicians will be willing to treat its 40 million enrollees.

"Most physicians are small business (owners)," said Cecil Wilson, an American Medical Association board member. "In a small business, if your payments don't cover the cost of providing care, then you make an adjustment."

That adjustment, unfortunately, may result in reduced access to care for Medicare enrollees.

A study conducted by the American Medical Association found 32 percent of 8,955 physicians surveyed would accept fewer new Medicare patients under the proposed payment cuts, and 28 percent said they would stop accepting new patients on the federal insurance plan altogether.

Other physicians may compensate in other areas of their practices, according to a survey conducted by the American Medical Group Association, which represents medical groups.

"A majority of (physicians surveyed) would continue to treat Medicare patients, but would limit new physician hires and limit upgrades to electronic medical records systems," said Chet Speed, vice president of public policy for the association.

Although Congress has blocked payment cuts in the past, it hasn't finalized any plan of action this year. Several different options are currently under consideration in the House Ways and Means Committee, which holds responsibility, along with the Senate Finance Committee, for any action on the issue.

"There are a number of options on the table," J. Jioni Palmer, press secretary for the House Ways and Means Committee, told UPI. "We're aware that this is a major issue, but it's too early in the process to go into specifics."

One possibility lies in the State Children's Health Insurance Program, a federal coverage plan for low-income children who don't qualify for Medicare, which is up for reauthorization this year. Congress might chose to bundle the physician payment legislation with the SCHIP reauthorization.

"We have to act by the end of the summer on SCHIP and that vehicle offers a unique opportunity to tackle several of the healthcare issues before this Congress," Palmer said.