Physicians in Medicare Payment 'Quandary' With Debt Ceiling Deal

August 2, 2011

Worst-case scenario, physicians could see Medicare payment cuts of up to two percent in 2013. That’s on top of the already scheduled 30 percent cut to services looming January 1, 2012 due to the sustainable growth rate (SGR) formula for physician reimbursements in the Medicare program.

The debt ceiling deal, passed by the U.S. House and Senate and expected to be signed by President Obama Tuesday, could bring with it some heavy consequences for physicians treating Medicare patients.

Worst-case scenario, physicians could see Medicare payment cuts of up to two percent in 2013. That’s on top of the already scheduled 30 percent cut to services looming January 1, 2012 due to the sustainable growth rate (SGR) formula for physician reimbursements in the Medicare program.

Combined, physicians could soon encounter pay cuts of nearly 35 percent for Medicare services.
Physicians are facing several “unknowns” due to the uncertainty of the degree of SGR cuts that will actually take place. And the uncertainty of the degree of payment reimbursement cuts due to the debt ceiling deal, AAFP President Roland Goertz, MD, said in an interview Tuesday.

The deal makes no mention of the 30 percent SGR cuts already proposed. That’s a “gorilla in the room” that’s not being addressed, he said.

“I don’t know exactly what the formal impact of [the unknowns] will be and that leaves the family physicians and other physicians in as big a quandry as we’ve been in for the past year over what will, and how will, we plan for our office financial business side not knowing what we will be paid to take care of patients.”

Here’s a brief synopsis of the debt ceiling deal approved Tuesday: It requires spending cuts in two stages. Stage one, which does not include Medicare or Medicaid cuts, calls for immediate spending reductions of almost $1 trillion over a decade. 

Stage two is more relevant to physicians. A specially-appointed 12-member Congressional committee is charged with recommending $1.5 trillion in deficit reductions by the end of November.

These recommendations could include cuts to Medicare and Medicaid in the form of provider reimbursements. Congress will need to vote on the committee’s recommendations before the end of the year.

If the committee does not reach an agreement, or if its recommendations are rejected by the House or Senate, automatic cuts of $1.2 trillion will be applied in across-the-board spending - including Medicare. This has been dubbed "the trigger mechanism.”

According to reports, that trigger mechanism would include a 2 percent cut in Medicare reimbursements to providers and insurance companies.

Kevin Pho, internal-medicine physician and founder and editor of KevinMD.com, said the deal could have a “horrific” outcome on physicians.

“I wouldn’t be surprised to see deep cuts in provider and hospital Medicare payments, on top of the previously scheduled 29 -percent cut sans doc fix,” he recently blogged. “We’re talking a combined 30 - to 40 -percent cut or more. So, if Medicare patients are having a hard time finding a doctor now, it’s nothing compared to the shortages that will come soon.”

Even more problematic, Goertz said, is that a 32 percent cut could reduce the amount of healthcare services for all patients (not just those under Medicare) available in certain areas of the country.

For example, he said, if 50 percent of a practice’s patients are covered by Medicare, a 32 percent payment cut could threaten the livelihood of the practice.

“You may have a situation where access not only becomes hard for the Medicare recipient, you may have access be taken away from everybody because there’s no financially good model to make it work when a practice sustains 32 percent reductions in payments for 50 percent of what they do,” Goertz said.

The AMA, however, says it is hopeful the 12-member congressional committee will tackle the SGR issue.

"We anticipate the Medicare physician payment issue will be among the issues the committee will address, as everyone agrees that a 30 percent cut in payments to those who care for Medicare patients would hurt seniors' access to the healthcare they need and deserve," AMA President Peter Carmel said in an e-mailed statement.

President Obama acknowledged during a press conference Sunday evening that he is in favor of Congressional recommendations that will include adjustments to the Medicare.

“Despite what some in my own party have argued, I believe that we need to make some modest adjustments to programs like Medicare to ensure that they're still around for future generations,” he said.

Still, whether the adjustments will be “modest” is up in the air.