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Congress recently enacted legislation with the goal of providing better health care access for most Americans. Many of the provisions of the new health reforms are predicated on the sustainability and effectiveness of Medicare. However, Medicare is doomed to failure unless Congress takes action to fix a fundamental and dire problem existing within the current program. This is a problem that has plagued the program for the past decade and that the new health law failed to address.
Federal law requires Medicare payments to physicians to be modified annually using the Sustainable Growth Rate (SGR) formula. However, because of flaws in how it was built, the formula has mandated physician fee cuts almost every year for the past decade. Only short-term congressional fixes have stopped the cuts. Without a permanent solution, the cuts grow deeper each year. This year alone, physicians faced payments cuts of more than 21 percent twice.
To compound matters, the current payment system ensures hospitals, nursing homes, pharmaceutical companies, Medicare HMOs, and many other Medicare providers receive an automatic cost-of-living increase. Meanwhile, doctors – the frontline people who take care of sick and injured Medicare patients – have to scramble to avoid dramatic pay cuts.
The SGR formula originally was designed to control Medicare utilization by reducing physician fees. The primary drivers of utilization, however, are new or improved technologies, increased beneficiary awareness of potential treatment options, and a general shift from inpatient to outpatient care. Physician behavior controls none of these factors.
Physicians cannot continue to absorb cuts in Medicare fees and maintain viable practices. For the past decade, the cost of running a practice has increased almost 28 percent. During the same period, physician’ payments from Medicare have remained stagnant.
The continued uncertainty is forcing some physicians to make a difficult decision to either opt of Medicare, limit the number of patients they treat, or retire early. Results from recent survey  indicated 42 percent of Texas physicians currently treating Medicare patients would consider opting out of Medicare. Another 37 percent say the cuts would cause them to consider limiting the number of new Medicare patients they treat.
The reason is quite simple. Physicians simply can no longer afford to subsidize Medicare. Today, a family practice physician only makes $7.22 on an established patient visit. If Congress allows Medicare to cut physician payments by more than 21 percent, that same patients visit will actually cost the physician money.
Physicians can no longer make up the difference by seeing more patients. Instead, physicians will have to cut operating or staffing costs just to break even. How can Congress expect doctors to stay in the Medicare program?
Medicine’s 2010 Agenda
- To ensure Medicare patients have access to a doctor and to health care, the flawed Sustainable Growth Rate formula must be eliminated and replaced with a rational Medicare physician payment system that is fair and keeps up with the cost of running a practice.
Medicine’s Message
- Physicians are the foundation of the Medicare program. Without a robust supply of physicians to care for the millions of patients dependent upon Medicare, the program will implode. The government simply cannot build a new a new health care system on top of the crumbling Medicare foundation.
- The constant uncertainty surrounding physician Medicare payments threatens the viability of physician’ practices and harms patients’ access to needed health care.
2009 Federal Legislative Issue Briefs
U.S. Congressional main page
Last Published: 7/7/2010 Print this page
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