What Various Proposals to Cut Medicare Mean to Physicians

September 21, 2011

Two proposals that could dramatically influence the rate at which physicians are paid for their services were released this week.

Two proposals that could dramatically influence the rate at which physicians are paid for their services were released this week.

One of the proposals, a draft released from the Medicare Payment Advisory Committee (MedPAC), which advises congress on issues affecting the Medicare program, called for congress to repeal the sustainable growth rate (SGR) - a good thing, right? Not necessarily. According to the proposal, escaping the looming 30 percent pay cut would compel physicians to make some serious sacrifices.

The second proposal, set forth by President Obama, also calls for the repeal of the SGR. But again, the result of the repeal won’t bring about clear skies for physicians.

Key points from both proposals are detailed below, along with reaction from various professional organizations.

MedPAC Draft Proposal

In hopes of averting the 29.5 percent reduction in Medicare rates scheduled for January 1, MedPAC is calling for physicians, other health professionals, providers in other sectors, and beneficiaries to “share” the cost of repeal.

According to the proposal, beginning in January, primary-care physicians would experience a 10-year freeze for Medicare reimbursements. Specialists would experience a 5.9 percent cut for three straight years, followed by seven years of no change. This would reduce healthcare spending approximately $200 billion, the proposal says.

The proposal also noted the current RVU system needs to be adjusted to ensure it is based on “efficient” practices.

MedPac is scheduled to vote on the proposal, which will be fleshed out in more detail, when it meets again in early October, according to Medscape. If approved, the plan would be considered by Congress.

Reactions

AMA: Opposes
AMA President Peter W. Carmel says though a repeal of the SGR is a step “congress must take,” the MedPAC proposal is not the solution. It “poses a very real risk to compromise physicians' ability to retain staff, care for Medicare patients and make the investments needed to modernize their practices and participate in new models of care delivery like Accountable Care Organizations,” he said in a statement.

Alliance of Specialty Medicine: Opposes
"This proposal simply devalues the expertise and critical care that specialists provide to Medicare patients and will further restrict access to care for them," neurosurgeon and spokesman for the alliance Alex Valadka said in a statement. "The failure of the SGR is not the fault of physicians, and doctors should not be required to pay for its repeal essentially through cuts to ourselves."

American College of Surgeons: Opposes
“We do not believe that cuts are the answer. We believe that a replacement of the SGR needs to be created that leverages quality, bends the cost curve, pays down the SGR debt, and incentivizes value in the future,” the organization said in a statement.

Obama’s Proposal
The president’s proposal, issued this week, is aimed at reducing Medicare and Medicaid spending by $320 billion over 10 years. Here are some of the key ways he proposes to do that:

Much of his proposal builds on the Affordable Care Act’s initiatives to reduce wasteful spending and boost the quality of care.

The plan includes $248 billion in savings from Medicare. Within this total, 90 percent of the savings comes from “reducing overpayments in Medicare.” Likely, this would translate to lower payments for physicians - though it’s unclear just how much.

The plan also calls for reducing certain Medicare special payments including graduate medical education payments to “better align with patient care costs. And it calls for allowing Medicare to benefit from the same rebates that Medicaid receives for brand name and generic drugs.

Any savings that affect beneficiaries do not begin until 2017 and the plan does not propose to change the eligibility age for Medicare benefits.

Starting in 2017, the plan would target financial incentives to encourage new Medicare beneficiaries to use high-value services (to lower healthcare costs).

What about the SGR? On a conference call with reporters, senior White House health officials told NPR their baseline assumes that the Medicare physician cuts will not take effect.

Reactions:

AMA: In Favor
"The American Medical Association commends the president for recognizing that any serious plan to address the deficit must include a repeal of the Medicare sustainable growth rate formula,” President Carmel said in a statement. “Honest accounting of our nation's debt should not assume $300 billion in Medicare physician cuts, which congress has rejected repeatedly because of the significant, detrimental impact those cuts would have on patients’ access to care.”

AAMC: Opposes
“The dramatic cuts to graduate medical education (GME) as proposed in the president's plan would reduce the ability of teaching hospitals and physicians to care for the most vulnerable in our communities,” the organization’s president and CEO Darrell Kirch said in a statement. “AAMC-member teaching hospitals represent six percent of hospitals, yet provide 21 percent of Medicare and 28 percent of Medicaid care.”

AHA: Opposes
“Today’s plan to cut Medicare and Medicaid funding would translate into at least 200,000 job losses to hospitals and the businesses they support by 2021. This is the wrong prescription to create a healthier America and sustain job growth in a sector of the economy that is actually adding jobs,” Richard Umbdenstock, the organization’s president and CEO, said in a statement.

The above proposals and reactions offer some clues as to what’s going to be on the bargaining table in the coming months when it comes to healthcare spending, and therefore physician reimbursements. What’s your reaction?