Section 7: Provide Appropriate Funding for Physician Services

For decades, physicians have given away their services for free to patients who could not afford to pay. However, today’s health care market makes this very difficult. Medicare and Medicaid, which now cover 35 percent of health care in America, [86] often pay physicians less than it costs them to provide their services. Commercial insurance companies’ payment rates, computed largely as a percentage of Medicare, have followed the government-run programs into the basement. The nation’s 50 million uninsured, including 6.2 million Texans, [87]can rarely pay the costs of their health care. The squeeze leaves many physicians struggling to keep their practices open, let alone provide charity care. State and federal leaders must realize that cutting physicians’ payments is not an effective tool for controlling health care costs, and often exacerbates the cost of care. They also must realize that without physicians, no health care delivery system can be effective.

Recognize and cover physicians’ cost of providing care
Physicians’ practice costs  like any other business’ operating costs  continue to march upward. While the rate of increase, thankfully, has slowed in the past several years, physicians face growing demands to cover the salaries and benefits of their professional and office staff, purchase new clinical and practice management equipment, buy liability insurance, and pay the rent and utilities.

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The Medical Group Management Association’s (MGMA’s) data show that, for 2010, most physician groups were operating on razor-thin margins. MGMA each year compares physicians’ office costs and revenue in dollars per unit of service. (To simplify the accounting for the thousands of different types of services physicians provide, one unit of work is measured in relative value units or RVUs. This is a Medicare measure of the units of service produced. One unit of work is approximately the value of the simplest office visit for a new patient. Physician compensation is 30 percent of the total cost.) In 2010, physician-owned multispecialty groups brought in an average of $59 per unit of work while spending $60 to keep their clinics open, for an operating loss of $1 per unit of work. Family practice groups brought in less ($46 per unit of work) but only spent $45, for an operating profit of $1 per unit of work.  [88  

To stay open, any business must collect enough revenues to cover costs. Especially for patients covered by government insurance programs, this isn’t happening for physicians. MGMA data show that Medicare pays only 61 percent of physicians’ average costs. Medicaid payment per unit of work varies, but for most services, Medicaid payments cover less than half of the average cost to provide services. Faced with losses on every service delivered, physician practices are often forced to limit services to Medicare and Medicaid patients if they cannot make up the losses elsewhere. Physicians in a number of Texas communities say they have no other options but to move or retire. 

Ensure competitive Medicaid and CHIP payments for physicians
Medicaid is a state- and federally funded health care program that provides low-income patients access to essential health care services. Without Medicaid, millions more Texans would be uninsured: As of March 2012, Medicaid covered 3.3 million Texans. [89] To qualify, patients must be low-income, though being poor does not mean a patient will qualify. For example, low-income childless adults are not eligible even if their income meets the state’s Medicaid income requirements.

In 2014, that will change, when the Patient Protection and Affordable Care Act (PPACA) will allow states to expand Medicaid to cover all low-income adults up to 133 percent of poverty, or $14,856 for an individual. If Texas decides to expand Medicaid, the program will grow by an estimated 1.2 to 2 million enrollees. [90] In fiscal year 2010, Texas spent $23 billion on Medicaid, [91] of which Texas’ share was $7 billion; the federal government footed the bill for the remaining $16 billion. While most enrollees (75 percent) are pregnant women and children, they account for only about 40 percent of the program’s costs. Seniors and patients with disabilities make up the other 25 percent but account for 59 percent of the costs. [92] In 2011, the Texas Legislature enacted numerous reforms to reduce Medicaid expenditures by nearly $3 billion, including authorizing the expansion of Medicaid HMOs, decreasing physician and provider payments, and reducing benefits and services.

The Children’s Health Insurance Program (CHIP) provides health insurance to low-income children who do not qualify for Medicaid. Like Medicaid, the costs are shared between the state and federal government: The federal government pays 72 percent of Texas’ CHIP costs. As of March 2012, some 570,000 children were enrolled. To qualify, a family of four may not earn more than $46,100 (in 2012).

For physicians, Medicaid and CHIP are typically the lowest payers and often do not even cover the basic cost of providing the service. On average, Medicaid pays 73 percent of Medicare and about 50 percent of commercial insurance payments. [93]  In 2010 and 2011, the state cut already-meager payment rates another 2 percent. If lawmakers cut physicians’ rates further or fail to invest in a robust physician network, millions of Medicaid recipients will have an enrollment card but fewer physicians to care for them, driving them to more costly emergency departments (EDs).

Repeal the dual-eligible payment cut
In early 2012, legislators made a funding cut without knowing its true impact, creating a medical emergency for thousands of dual-eligible Texans and the physicians who care for them. “Dual-eligible” patients are low-income seniors and people with disabilities who qualify for both Medicare and Medicaid. In Texas, there are almost 465,000 dual-eligible patients, [94] who are among the sickest and most vulnerable people in our state.

When a physician provides treatment to a dual-eligible patient, Medicare pays the physician 80 percent and Medicaid the remaining 20 percent. Medicare also requires patients to pay an annual deductible — $140 in 2012 — which Medicaid pays because the patients are so poor. However, beginning on Jan. 1, 2012, Texas Medicaid implemented a new policy, limiting what it pays physicians (and other providers) to the maximum of what Medicaid pays for the same service. In most instances, the patient’s physician faces a cut of 20 percent, and potentially even more. Consider these examples: [95] 

• Example 1: Established dual-eligible patient has not met any of the Medicare deductible and is seen during a routine office visit. Physician bills Medicare CPT code 99213. Maximum Medicare allowable is $66.90. Medicare pays $0 because deductible has not been met. Medicaid will pay $33.27, the Medicaid allowable for this code. Prior to policy change, physician would have been paid up to the Medicare allowable ($66.90). This is, in essence, a 50-percent payment cut.

• Example 2: Established dual-eligible patient visits physician office for routine visit; Medicare deductible has been met. Physician bills Medicare CPT code 99213. Medicare allowable is $66.90. Medicare pays $53.52, 80 percent of the allowable. Physician bills Medicaid for the remaining 20 percent. Medicaid allowable is $33.27, so no coinsurance will be paid. Under old policy, Medicaid would have paid an additional $13.38 so that physician’s entire payment equaled Medicare’s $66.90 allowable. This is a 20-percent payment cut.

The dual-eligible payment cut unfairly penalizes physicians who care for the sickest and frailest Medicare patients. The policy change hit particularly hard practices in rural and inner-city Texas, along the Mexico border, and many of those serving nursing homes. Those practices serve a disproportionate number of dual-eligible Medicare patients. In addition, the cut is already causing physicians to limit how many dual-eligible patients they are willing to treat, restrict their Medicaid participation, and forego practicing in communities that most need them. 

Stop the Medicare Meltdown  repeal the SGR 
Since the turn of the century, nothing has so regularly and completely vexed and frustrated physicians more than our annual game of chicken with Congress over Medicare payments.

Medicare patients and military families are never out of danger. Year after year, the specter of congressional action or lack of action threatens to jeopardize health care for Medicare patients. And, because TRICARE rates for military families are based on Medicare, they’re in danger, too.

This is because federal law requires Medicare payments to physicians to be modified annually using the Sustainable Growth Rate (SGR) formula. Because of flaws in how it was designed, the formula has mandated physician fee cuts every year for the past decade. Only short-term congressional fixes have stopped the cuts. In 2010 alone, Congress had to intervene five times to stop a 25-percent cut. It took emergency action in December 2011 and again in February 2012 to stop a 27.4-percent cut. That would have meant an annual loss of $1.71 billion to physicians for the care of elderly patients and Texans with disabilities.

 Comparative Fee Updates for Medicare Providers 

Most commercial insurers pay physicians based on a percentage of the Medicare rate, which has changed little over the past decade. This double hit has meant a flat-lining of physician payment rates that threatens the viability of many physician practices and makes investment in new clinical equipment and health information technology increasingly more difficult and challenging.

Because Congress once again failed to repeal the SGR, the Congressional Budget Office projects that the next cut, scheduled for Jan. 1, 2013, will be approximately 30 percent. Without a permanent solution, the size of the cuts continues to grow.

Instead of fixing the flawed formula, Congress freezes the cut each year. In essence, Congress has put the SGR debt on our credit card. The 10-year cost of fixing the problem is now well over $300 billion. [96 

Considering that Medicare currently pays, on average, at least 20 percent less than a physician’s cost to provide care, this decade-long and continued uncertainty is forcing some physicians to make the difficult decision to either opt out of Medicare, limit the number of patients they treat, or retire early. A recent TMA survey indicates that 50 percent of Texas physicians are considering opting out of the Medicare program altogether. [97] 

Medicare patients often can’t get in to see their physicians as quickly as needed. This forces Medicare patients to put off care until they are so sick they need to use a hospital’s ED, which is more expensive. Sending a Medicare patient to the ED is counterproductive to the goal set by Congress and the White House to keep health care costs down by encouraging all Americans to have a “medical home.” 

We all recognize the value that hospitals, nursing homes, home health services, durable medical equipment, and other health care providers give to Medicare patients. Over the past decade, they have received annual payment increases, while physicians have not.

Medicare patients should feel anything but secure about the future of their health care. Physicians are the foundation of the Medicare program. Without a robust network of physicians to care for the millions of patients dependent on Medicare, the program will not work.

Repeal the Independent Payment Advisory Board 

Replacing the SGR will be meaningless unless Congress also repeals the Independent Payment Advisory Board (IPAB). Leaving both in place would create cruel and unusual double jeopardy for physicians who want to care for senior citizens and military families. The PPACA created a 15-member IPAB to recommend measures to reduce Medicare spending if costs exceed targeted growth rates set by the Centers for Medicare & Medicaid Services.   

The PPACA prohibits the panel from recommending changes to eligibility, coverage, or other factors that drive utilization of health care services. This means the board will have only one option — cut payments. And through 2019, hospitals, Medicare Advantage plans, Medicare prescription drug plans, and health care professionals other than physicians are exempt. [98] This means the board will have only one option — cut Medicare payments to physicians. Cuts the board recommends will automatically take effect, unless Congress acts to suspend them. 

As we’ve seen with the SGR, it’s obvious that cuts the IPAB enacts will devastate Medicare beneficiaries’ ability to find physicians to care for them. The issue of Medicare spending for 3.8 million Texans is too important to be left in the hands of an unaccountable board that makes decisions based solely on cost.  

Allow Medicare beneficiaries to contract directly with physicians for care
Growing bureaucratic burdens, inadequate payment rates that haven’t kept pace with the rising costs of providing care, annual threats of pay cuts, and full patient schedules combine to make it increasingly difficult for physicians to continue seeing Medicare patients. While most will keep their longtime patients after they become eligible for Medicare, a growing number of physicians already have been forced to stop seeing new Medicare patients.

Currently, seniors who want to see a doctor who will not accept their Medicare insurance must pay for their care entirely out of their own pocket. As baby boomers come of Medicare age, we will need to change some of Medicare’s inflexible rules to ensure patients have access to a physician. One way to accomplish this is to allow Medicare patients to see any physician of their choice. Physicians should be allowed to enter into direct contracts with Medicare patients, even when they opt out of Medicare.

The Medicare Patient Empowerment Act would allow seniors to use their current Medicare coverage to see a doctor who is not accepting Medicare. It would strengthen patient choice and access to physicians. It would ensure that seniors can see any doctor they choose and still use the Medicare benefits for which they have paid, without having to change their Medicare plan.

The act would allow Medicare patients and their physicians to enter into private contracts without penalty to either party. It would enable beneficiaries to use their Medicare benefits to see physicians who do not accept Medicare, as opposed to paying for the entire cost of their care out of pocket as required under current law. This legislation would ensure that seniors can see any physician they choose, even if that physician cannot accept their Medicare.

TMA Recommendations: 

  • Reverse recent cuts in physicians’ Medicare, Medicaid, and Children’s Health Insurance Program payments, particularly those that hurt access to care.

  • Devise and enact a system for providing health care to low-income Texans with realistic payment to physicians, less stifling state bureaucracy, and no fraud-and-abuse witch hunts.

  • Support development of innovative payment and delivery system reforms, such as the patient-centered medical home and physician-led accountable care organizations, to help slow Medicaid spending. (See Section 2.)

  • Maintain physician loan repayment programs to help entice more physicians to participate in Medicaid.

  • Repeal the dual-eligible budget cut.

  • Repeal the broken Sustainable Growth Rate formula. Enact a rational Medicare physician payment system that works and is backed by a fair, stable funding formula.

  • Fix the broken Medicare physician payment system before giving additional increases to any other providers.

  • Repeal the Independent Payment Advisory Board (IPAB). Keep Congress accountable for the Medicare system. If decisions are made to limit funding for health care services, priorities will have to be set. It should not be left, however, to an unelected and unaccountable IPAB.

  • Pass the Medicare Patient Empowerment Act. Give physicians the ability to contract directly for any and all Medicare services.


Healthy Vision 2020 


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    They should reinstate Medicaid payments so patients can have a better treatment

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