Medicare Meltdown: Another Lost Opportunity
By Amy Lynn Sorrel Texas Medicine June 2014

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Cover Story — June 2014

Tex Med. 2014;110(6):20-27.

By Amy Lynn Sorrel
Associate Editor

Congress came closer than ever to fixing the fatally flawed Medicare Sustainable Growth Rate (SGR) formula used to calculate physician fees every year. 

The stars appeared to align when both parties and both chambers of Congress actually agreed on a bill to once and for all eliminate the SGR problem that for the past decade threatened steep cuts to physician payments and to transition to a new quality reporting-based system. The Congressional Budget Office (CBO) slashed the price tag on repealing the SGR to $138 billion over 10 years — just over half the $244 billion it would have cost in 2012. Extensive lobbying efforts by the Texas Medical Association, the American Medical Association, and organized medicine overall finally seemed to pay off. 

"All of the legislators I talked to on the Hill were in enthusiastic agreement that we have to get this fixed now," said Dawn Buckingham, MD, chair of TMA's Council on Legislation. The reform legislation had a fatal flaw of its own, however: "The big conflict was over how to pay for it."

Congress let physicians down before, she says. But this time, the unprecedented progress made lawmakers' familiar political routines particularly vexing when — for the 17th time — they defaulted to a temporary patch. On March 31 — the eve of a scheduled 24-percent pay reduction — Congress put another Band-Aid on the problem by legislating a 12-month freeze on current payment rates until April 1, 2015. In another measure of relief, the legislation delayed the ICD-10 start date for one year, to Oct. 1, 2015. (Read "ICD-10 Countdown Continued," May 2014 Texas Medicine, pages 22-29.)

The impending cut undoubtedly would have devastated physician practices, Dr. Buckingham says. "But it's especially disappointing and unfortunate to have another patch because this time we really had a workable solution." 

She describes the annual ritual as a combination of Groundhog Day and Chinese water torture: "Once again, we're brought to the cliff with our feet dangling off, wondering if we are going to get pulled back. It's painful and exhausting, and in the end we are just trying to take care of our patients."

With each cliffhanger, the stakes climb for physicians and senior patients who depend on them. Even the physician pipeline is under pressure.

When it came time for Vinh Q. Nguyen, MD, to find a job after residency training in Houston, he forewent setting up his own private practice so he could afford to pursue his specialty as a family physician and geriatrician caring for elderly patients. Instead, he'll start work in July in a hospital setting.

"Without a doubt, the difficulty of doing only geriatric care for Medicare patients would be unsustainable for a young physician coming out wanting to do a solo private practice. It's not sustainable for physicians' costs to go up every year and for their payment to stay the same," he said. 

The former chair of TMA's Resident and Fellow Section says his young colleagues are taking that into account when choosing their specialties, the kinds of jobs they take, and whether they see Medicare patients. "If we want our senior patients to be able to go to a [less costly] outpatient setting to see their doctors, then something has to change."

The constant uncertainty over the years even forced Dr. Buckingham to put off hiring new physicians like Dr. Nguyen. With 60 percent of her patients in Medicare, "I can't plan for the future because I don't know what my revenues are going to be. We don't hire people when staff quits. We run as lean as we can, and we always keep an active plan as to who we would have to lay off and what patients we can take. We are trying our best to take care of our patients, but at some point, that's going to be impossible." 

That's why TMA and AMA leaders are eager for Congress to get back to the negotiating table and capitalize on the legislative strides already made.

"This is very disappointing, and the worst thing about it is the unpredictability for physicians and patients. If we're talking about this again in March of next year, that's a big problem," warned TMA President Austin King, MD.  

AMA President Ardis D. Hoven, MD, echoed that disappointment. 

"We had robust momentum to make something happen, and at the end of the day it was politics as usual. But we are in a much better place than a year ago. We made great progress, and we have good policy. We can't allow it to lay dead for another year. We need to keep pushing the boulder if we want the speed to pick up," she said.

Lawmakers say they share those sentiments but acknowledge the fiscal barriers that lie ahead. 

"We are closer than ever before; there's no reason in the world to stop working now, and I don't intend to do that," said U.S. Rep. Michael C. Burgess, MD (R-Texas). He is vice chair of the House Energy and Commerce Subcommittee on Health and one of the bill drafters and primary sponsors. "The good news is, we have a policy to repeal the SGR that is agreed to by Republicans and Democrats in the House and Senate. And that's a big deal. We didn't have that a year ago. Everybody always knew the hard part was going to be the offsets, and sure enough that was. But just like the Butch Cassidy and the Sundance Kid analogy, we all have to hold hands and jump at the same time." 

Show Me the Money

Until the final hours, lawmakers trumpeted their support for the SGR Repeal and Medicare Provider Payment Modernization Act of 2014. The legislation was the culmination of more than a year's worth of policymaking by the House Energy and Commerce, House Ways and Means, and Senate Finance committees. It also drew widespread support from the congressional Doctors Caucus and the house of medicine, including TMA and AMA.

In addition to repealing the SGR, the legislation would have provided automatic positive payment updates of 0.5 percent for five years; consolidated the current Medicare quality-reporting programs into one streamlined program that links physician pay to a set of physician-endorsed quality measures; and allowed physicians to transition from fee-for-service to alternative payment models. 

Until now, "we never had a bill on the policy side," said TMA Vice President for Advocacy Darren Whitehurst. Members of Congress "showed a willingness to work across the aisle to come up with a policy proposal that was not perfect but was a step in the right direction. “Unfortunately, they didn't do on the finance side what they did on the policy side in terms of a bipartisan effort," he said, adding that dealing with a “pay-for” during an election year also likely contributed to their inaction.

That's especially disconcerting, he says, because Congress spends more on temporary patches than the cost of actually fixing the problem, and each individual patch costs more each year. (See "We Don't Need No Stinking Patches.")

That's also why TMA and AMA continue to urge Congress to quickly pick up where they left off. The higher that price tag gets, the more politically difficult a solution becomes, Mr. Whitehurst says. So when the CBO significantly reduced that estimate, "it finally put this in the realm of the doable." 

But the financing proposals put forth this year by the Republican-controlled House and Democratic-controlled Senate were so politically charged that neither could really survive: The House on March 14 passed the Medicare pay fix with money from a five-year delay in the Affordable Care Act individual mandate — a nonstarter in the Senate, which never took up the bill. Senate Democrats, on the other hand, floated the idea of using unspent war money, known as "OCO," or Overseas Contingency Operations, funds — also a nonstarter in the House.

Patch #17

With no agreement and the clock ticking down to the March 31 deadline, Congress hastily passed a $21 billion patch with opposition from AMA and some other physician organizations. President Barack Obama signed it into law on April 2.

In lieu of the comprehensive reforms, the Protecting Access to Medicare Act of 2014 extends the current 0.5-percent payment increase through the end of this year and freezes payment rates until April 1, 2015. It also:  

  • Extends the geographic adjustment (GPCI) "floor" of 1.0 for physician work in the Medicare fee schedule for 12 months.
  • Delays implementation of the ICD-10 diagnosis coding set by one year, until Oct. 1, 2015.
  • Pays for the patch through various payment cuts to hospitals, "misvalued" physician services, and certain diagnostic tests and imaging equipment.
  • Gives the U.S. Health and Human Services secretary discretion to continue suspending recovery audit contractor (RAC) postpayment audits under the "2-Midnight" policy through June 2015.
  • Broadens the impact of the across-the-board Medicare "sequester" cuts required by federal spending reductions to control the national deficit.  

The patch was not Congress' first choice, says House Ways and Means Health Subcommittee Chair Kevin Brady (R-Texas). But the reform bill lost what he called "valuable momentum" during the unexpected transition from Sen. Max Baucus (D-Mont.) to Sen. Ron Wyden (D-Ore.) as chair of the Senate Finance Committee in February, right after the House bill was introduced. 

Both chairs supported the effort, "but that was just a major transition, and we lost a good six weeks of momentum in a time when we hoped to gather momentum. Unfortunately, that left us with facing a lapse [in physician payments], which was absolutely unacceptable." (Senator Baucus resigned the Senate in February to become U.S. ambassador to China.)

Representative Brady says the financing proposals were nevertheless "sincere" efforts by both sides to keep moving the legislation forward and get both parties to the negotiating table on an agreeable pay-for solution. He pointed to other potential options, including savings from structural reforms of Medicare like combining parts A (hospital services) and B (physician services) or capping seniors' out-of-pocket costs.   

Finding the money "will be difficult. But it is doable," he said. "It's just going to take some hard work. But this is significantly different than in the past where there was no solution within 100 miles of the table, and the only discussion was how long a patch would be. Now we have [a policy]. We have a cost and a price to negotiate toward and a real incentive to get this done. So there is a much stronger urgency and buy-in from all parties."

U.S. Rep. Henry Cuellar (D-Texas) also hesitantly supported the patch over what he agreed was significant progress toward a permanent fix. But the House Appropriations Committee member criticized House Republicans for killing the momentum with an unworkable pay-for solution. "We were able to sit down in a bipartisan way to figure out how to fix [the SGR problem]. We also have to make sure we sit down to come up with a bipartisan agreement to pay for it."

Cycle of Uncertainty

Meanwhile, physicians and patients are stuck in another cycle of uncertainty, with tough decisions to make about Medicare participation. (See "Medicare: In or Out?") 

TMA reluctantly supported the patch but preferred a long-overdue permanent fix, Dr. King says. Each year, the faulty SGR requires fee cuts to offset growing demand for Medicare services. But each time Congress fails to repeal the SGR and replace it with a more sensible system, the cuts grow, and the cost of fixing the problem compounds.

"I thought this was the year we would get there because for the first time the cost to correct the situation decreased. That alone should have been enough incentive for Congress to go ahead while we can to correct it," Dr. King said. 

But Congress has used a Band-Aid approach for so long, the Abilene otolaryngologist worries the damage may be done as the problem continues to chase doctors out of the Medicare program. He is among the roughly 40 percent of Texas physicians restricting the number of new Medicare patients they see because of the unpredictability. In fact, the percentage of Texas physicians accepting all new Medicare patients dropped from 78 percent in 2000 to only 59 percent in 2012, according to TMA's latest survey. 

Some physicians — and their patients — don't have that choice, Dr. King says, particularly in rural areas.

Chad White, MD, is one of just two family physicians in rural Hamlin. With 60 percent of his patients in Medicare, "we depend on these payments. This is who I serve. This is where I live. And these are my patients," many of whom drive 45 minutes to see him because their doctors in nearby towns left the program. 

Meanwhile, the other Hamlin doctor nears retirement. 

"I can't do this by myself. But it's hard to bring people to these areas and for me to continue practicing without enough reimbursement to make a living," Dr. White said.

And at a time when the health care delivery system focuses on reform, Dr. Hoven adds that Medicare pay instability holds back physicians from implementing practice changes to improve quality of care for patients. "How can physicians have the personnel to do care coordination, or the technology and resources available to provide innovative care in the way they want to when [Congress' inaction] has pulled the carpet out from under their feet?"

Lawmakers sweetened the deal by heeding medicine's call to delay ICD-10, but the patch nonetheless remains frustrating, she said. "If you've got a bunch of lemons, you're going to make lemonade out of it."

A New Future?

But neither physicians nor lawmakers want to see the work done so far go sour. 

Mr. Whitehurst says the comprehensive SGR repeal legislation remains alive until January 2015, when the current congressional session adjourns, and provides a "good foundation" for future discussions. Texas champions like Representative Brady helped smooth some rough edges of early proposals with medicine's recommendations, and future regulatory processes could present similar opportunities. "At least this [bill] gets us over the SGR hump," Mr. Whitehurst said.

The proposal generally reflects a set of core reform principles that AMA, TMA, and other state and national medical societies have advocated to Congress for transitioning from the SGR to a new "high-performing" Medicare system. Log on to the TMA website to read the TMA/AMA letter to Congress. 

The first thing the bill would do is repeal the SGR, followed by a five-year period of fee-for-service payments that include an inflation update of 0.5 percent per year from 2014 to 2018. The repeal is "the biggest change, and I'm immobile on that. This is not just reforming the SGR. It has to go," Representative Burgess said. 

He acknowledges medicine's concerns that the fee update is not necessarily generous, considering how long physicians have endured payments that lag behind the cost of care. But it eliminates the threat of cuts and represents a compromise that he calls "pretty close" to the Medicare Economic Index, which measures the change in the costs of running a medical practice, including wages, office expenses, and professional liability insurance, for example.

Following the transition period, in 2018 Medicare would begin to modify physician payments under a new merit-based incentive payment system (MIPS) that links a portion of doctors' pay to their quality performance. The MIPS would consolidate the three existing federal quality reporting programs — the Physician Quality Reporting System (PQRS), meaningful use of electronic health records, and the value-based payment modifier — a shift that could help reduce physicians' compliance and reporting costs and offer fewer penalties and more flexibility, at least in the short term, says Donna Kinney, director of research and data analysis in TMA's Medical Economics Department.

Physicians would still use programs like PQRS but would have a broader range of measures to meet their quality requirements, such as providing after-hours care, she says. Penalties under the current programs, which could add up to as much as 6 percent of physician pay for noncompliance, would sunset in 2017. And while penalties under the new system would still exist, the bill added more funds for possible incentive payments for their quality improvement efforts and for small practices to implement the MIPS changes. The bonuses and penalties would range from 4 percent in 2018 to 9 percent in 2021 and beyond. 

At medicine's urging, the bill also invites physician organizations to help develop the quality reporting measures to be used. 

"Doctors know quality more than the bureaucracy, so doctors need to be involved in that," Representative Burgess said. 

And physicians could opt to remain in fee-for-service Medicare, but they could qualify for additional bonus payments of up to 5 percent by participating in alternative payment models such as medical homes or accountable care organizations. 

In urging Congress to move the ball forward, TMA continues to advocate for improvements that ensure any new payment system keeps up with physicians' cost of providing care without additional burdens and unwarranted penalties. The legislation may not be perfect, but "represents a marked improvement over the status quo," TMA and other members of the Coalition of State Medical Societies told congressional leaders in a February support letter.

Representatives Brady and Burgess say their goal is to get the bill across the finish line this year, before the current patch expires. 

"It's critical to access. It's critical to long-term Medicare reform. And we are not going to be able to deal with other areas of health care that need our attention until this gets resolved," Representative Brady said.

Congressman Burgess added that "there was at least a tacit agreement by leadership that we are not finished working on this, and we are not going to put this back on the shelf for the next 12 months. That would be the missed opportunity."

Amy Lynn Sorrel can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email.


Medicare: In or Out?

Medicare payment uncertainty means physicians have decisions to make about their participation in the program. You have three options:   

  1. Participation (PAR): This means you agree to provide all covered services for all Medicare Part B beneficiaries on an assigned basis and accept the Medicare-approved amount as payment in full. Medicare pays you directly.
  2. Non-participation (Non-PAR): This means you have not entered into an agreement to accept assignment on all Medicare claims, so you can choose whether to do so on a claim-by-claim basis. Payment is 5 percent less than the PAR amount. On unassigned claims, Medicare pays the patient, and you collect from the patient.
  3. Opt-out: This means you privately contract, in writing, with Medicare patients on fees and services. Except in certain emergency situations, Medicare will not cover your services and will neither pay you nor reimburse the patient. If done properly, your opt-out status lasts two years. 

TMA recommends you evaluate your Medicare participation status each year. If you want to make changes, you must fill out certain forms to notify Medicare of your decision during the annual open enrollment process, which usually occurs at the end of each calendar year. Participation decisions are effective Jan. 1 of each year. 

As soon as Medicare makes the 2015 enrollment deadlines available, TMA will notify you through the association's online Action and TMA Practice E-tips newsletters. Subscribe by visiting And for more information on all things Medicare, including enrollment, payment, and coding, you can also consult TMA's Medicare Resource Center online. Or email the TMA Knowledge Center or (800) 880-7955.

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June 2014 Texas Medicine Contents
Texas Medicine Main Page

Last Updated On

April 17, 2018

Originally Published On

May 19, 2014

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