Trendspotter: Leaving or Limiting Medicare?

June 23, 2010

The plain fact is that Medicare accounts for a fifth of the nation’s total healthcare spending. Physicians who turn their backs on that are endangering the long-run financial health of their own practices. And, sooner or later, the government will have to fix the Medicare reimbursement formula.

There’s a whole lot of hand-wringing going on about the failure of Congress to pass a “doc fix” that will permanently avert the threat of a 21 percent cut in Medicare payments. Some recent research shows that the number of physicians who either don’t participate in Medicare or won’t take any more senior patients is on the rise.

But the plain fact is that Medicare accounts for a fifth of the nation’s total healthcare spending. Physicians who turn their backs on that are endangering the long-run financial health of their own practices. And, sooner or later, the government will have to fix the Medicare reimbursement formula.

Concerned about the swelling budget deficit, the best the U.S. Senate could do for physicians last week was to rescind the Medicare cut for six months. The House leadership has said it will not take up the measure - and, while the two chambers try to resolve their differences, physicians’ payments from CMS are up in the air.

In the end, the 21 percent cut will undoubtedly be postponed yet again. The real problems, from doctors’ point of view, are the uncertainty about the future of Medicare reimbursement and the fact that current Medicare payments are nearly 20 percent lower, on average, than private insurance payments. Those issues are driving an increasing number of physicians to drop or limit Medicare business, according to a few recent surveys.

In a poll conducted by the American Academy of Family Physicians, 13 percent of family doctors said they didn’t participate in Medicare last year, compared to 8 percent in 2008 and 6 percent in 2004. The situation is worse among osteopaths, says the American Osteopathic Association: 15 percent don’t treat Medicare patients and 19 percent don’t accept new patients in the government program. The AMA did a study showing that 17 percent of all physicians surveyed restrict the number of Medicare patients in their practice; among primary-care physicians, the figure is an astounding 31 percent.

CMS doesn’t measure how many physicians limit their Medicare practices. But its figures show that 97 percent of doctors still participate in Medicare.

The data from these various surveys suggest that far more physicians are restricting the size of their Medicare panels than are declining to participate in Medicare. In addition, the rising percentage of FPs who have dropped out of Medicare in the AAFP survey, as well as the high proportion of primary-care physicians in the AMA poll who limit their Medicare practices, implies that primary-care doctors are more willing to forgo Medicare revenue than specialists are. That may be because Medicare contributes a larger portion of practice volume to specialists, especially proceduralists and physicians who do a lot of hospital work.

With primary-care physicians in short supply, perhaps some of them can prosper by taking care only of people below 65 years old and seniors who are willing to pay them out of pocket. But in the long run, the demographic trends predict that neither primary-care doctors nor specialists will do well if they ignore seniors. In fact, the fastest-growing segment of the population, believe it or not, is people over 85. So if doctors say “nyet” to Medicare, they’re going to forgo a lot of potential revenue.

Some physicians, especially those who practice in areas where private plans still pay fairly well, will tell you that they lose money when they see Medicare patients. (Of course, that goes double for Medicaid, but we won’t go into that.) Perhaps that’s true from the viewpoint of opportunity cost: In a busy practice, every patient with low-paying insurance takes time that could be spent with a patient who has better-paying coverage. But again, the trends undercut this argument: Fewer and fewer people have good insurance, while enrollment in the government programs is accelerating. So the trick is to figure out how to build care teams and automate your practice so you can provide better care to everyone at a lower cost.

That’s easier said than done, of course, but it’s what the patient-centered medical home, accountable care organizations, and other current trends are all about. Better find out about them instead of turning your back on Medicare.