Slightly Better Than Nothing

Congress Fails Miserably on Medicare Fees … Again

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Cover Story - March 2008  


By  Ken Ortolon
Senior Editor  

Congress is playing a game of political chicken with the medical profession. Lawmakers have again failed to fix the fatally flawed Medicare Sustainable Growth Rate (SGR) formula used to calculate physician fees every year. Now, they are running the risk physicians will throw up their hands in frustration and bolt from Medicare. Just like they did with Medicaid and workers' compensation.

"It's clear Congress doesn't want to deal with hard decisions - how do we ensure that Medicare patients have access to doctors," Temple cardiologist Jim Rohack, MD, a member of the American Medical Association Board of Trustees, said of Congress' decision to opt for a temporary solution to inadequate Medicare fees.

"They don't believe physicians won't see Medicare patients, so they continue to punt the hard decisions of saying we need to get rid of the SGR," Dr. Rohack said.

AMA and Texas Medical Association leaders are concerned that physicians could walk away from Medicare in droves if a permanent solution isn't found to make sure Medicare fees keep pace with inflation, leaving America's seniors as the big losers.

"If doctors quit seeing Medicare patients because of the payment issues, because they just can't afford to see them, where are those people going to end up?" asked TMA President William W. Hinchey, MD, of San Antonio. "They're going to end up in county hospitals, which are overburdened already. If they don't have a medical home, they're going to end up sicker and in the emergency room."

The only silver lining appears to be that Congress put even more pressure on itself to find a solution by authorizing the 0.5-percent fee increase for only six months, putting the new deadline for action before the presidential nominating conventions and just as the politicians' reelection campaigns are heating up. 

Eleventh-Hour Action  

On Dec. 19, Congress put another Band-Aid on the SGR problem, passing legislation that replaces a 10.1-percent physician fee cut, which would have taken affect Jan. 1, with a 0.5-percent increase that expires on June 30.

According to AMA, the increase will result in an additional $3.1 billion in physician payments over the six-month period. AMA estimates Congress' action saved Texas physicians some $228 million - or $4,700 per physician - that would have been lost under the scheduled cut. Unfortunately, other changes in Medicare payment calculations mean that physicians in Austin, Dallas, Fort Worth, and Houston may see little change or small payment reductions for most services.

Congress must again act this year to avert another fee cut before July 1. AMA says that cut would grow to 10.6 percent to offset the 0.5-percent increase for the first half of the year.

The legislation also authorized 1.5-percent bonuses for physicians who participate in Medicare's quality reporting initiative through Dec. 31. It also extended the floor for geographic practice cost adjustments through June 30.

Several proposals opposed by organized medicine did not wind up in the final bill, including limits on physician ownership of hospitals, cuts in imaging payments, specialty-specific expenditure targets, and an electronic prescribing mandate.

While AMA applauded congressional leaders for trying to resolve the SGR issue, it didn't exactly jump for joy at the six-month reprieve from further Medicare fee cuts.

"It is extremely disappointing that after all the hard work in the House earlier this year to replace two years of Medicare physician payment cuts with an increase that would help physicians keep up with medical practice costs, the final action passed by the House and Senate stops the cut for just six months, which creates uncertainty for both Medicare patients and physicians," said Edward Langston, MD, chair of the AMA Board of Trustees.

TMA leaders also are disappointed with the six-month fee increase.

"It was quite frustrating to field calls from legislative assistants in some of the members' offices," Dr. Hinchey said. "Each time, I listened patiently to their explanations and politely said, 'If you are waiting for me to say thanks, we might as well end the conversation.'"

Austin obstetrician-gynecologist Albert T. Gros, MD, chair of TMA's Council on Legislation, added, "A half-percent increase is better than a 10-percent cut, but not much." Either way, Dr. Gros says fees still are not keeping pace with inflation.

AMA mounted an aggressive lobbying campaign to secure at least a two-year payment increase to pave the way for a long-term fix for the flawed payment formula. That campaign generated some 50,000 telephone calls and 500,000 total contacts by physicians and patients to members of Congress.

Darren Whitehurst, TMA vice president, advocacy, says House Democratic leaders floated a plan that would have accomplished AMA's goal of a two-year fix, paying for the physician fee increases with significant cuts in the Medicare Advantage program. Senate Finance Committee Chair Max Baucus (D-Mont.) also seemed interested in a two-year fix, but it was clear the Senate was not willing to go along with the deep cuts the House proposed for Medicare Advantage plans, particularly because President Bush threatened to veto any cuts to those plans.

"The problem in [Washington] D.C. is the pay-go rules," Mr. Whitehurst said, referring to congressional rules that require any spending increases to be offset by spending cuts. "If you are going to pay more money to somebody, it's got to come out of somebody else's pocket. The problem was identifying where those dollars were coming from, particularly with the president saying any bill that took the money away from Medicare Advantage plans would be vetoed."

In the end, AMA says the hyper-partisan environment in Washington that has resulted in gridlock on a number of issues, the pay-go rules, and the president's veto threat spelled doom for any permanent SGR fix and made it difficult to do even a one-year fix as Congress has done the past several years.

U.S. Rep. Michael Burgess, MD (R-Texas), says the pay-go issue is disingenuous because the money is already being spent. While the SGR keeps physician fees down, it does not slow the volume of physician services provided to an ever-growing Medicare population.

"It's almost a bookkeeping maneuver that needs to be done to account for those dollars on the books," Representative Burgess said. "It's not like they're dollars that are sitting in the federal treasury drawing interest at bond rates. They are dollars that have already been spent. Part of me that tends to be fairly simplistic says we just ought to acknowledge that debt, wipe it clean, and start anew with an MEI-based [Medicare Economic Index-based] formula."

MEI   measures the change in the cost of running a medical practice, including such things as wages, fringe benefits, office expenses, and professional liability insurance.  

Payments for other providers, particularly hospitals, also are tied to the MEI. Mr. Whitehurst says hospitals have gotten an average increase of 2 percent to 3 percent annually over the past several years because their payments are tied to the MEI. Medicare Advantage plans have gotten even larger increases during that period, he says. 

Tearing Down the Silos  

Dr. Hinchey says the problem with the Medicare funding system is that it has not evolved with the changes in the way medicine has been practiced over the past four decades.

"Medicine is different than it was when the Medicare program came into being in 1965," he said. "So much care was done in the hospital setting then. Today, so much is done outside the hospital, and yet Medicare is the one payment program that has not adjusted to the practice of medicine in the 21st century."

The SGR was designed to rein in cost increases for physician services in Medicare Part B, but fails to recognize that the increasing volume of services performed in outpatient settings, such as physician offices, is producing significant savings for Medicare Part A, which pays for hospital services.

Dr. Hinchey says the silos of Medicare Part A, Part B, and Part D, which pays for prescription drugs, need to be torn down. "Let's use the dollars to best serve the senior population," he said.

Representative Burgess attempted something along those lines this year, when he filed legislation to repeal the SGR. His bill would have provided small physician fee increases for 2008 and 2009 and begun a phase-out of the SGR using Medicare Part A savings attributable to more efficient care being provided in physician offices.

Those savings are real, identifiable, and should be earmarked to offset repeal of the SGR, Representative Burgess says. Unfortunately, he adds, he never got the support from organized medicine that he felt was necessary to pass his bill. Organized medicine did not support the bill because it kept the SGR in place for two more years. 

Issuing a Manifesto  

Speaking at a grassroots political forum sponsored by the Texas Medical Association Political Action Committee (TEXPAC) in January, Representative Burgess said organized medicine must engage if it wants a permanent fix for Medicare physician fees.

"This requires all hands on deck," he said. "You can't sit back and let someone else do something for us."

And, TMA and AMA have already joined the battle. In February, Dr. Hinchey issued what he dubbed as the "Texas Medicare Manifesto" to hold government accountable for the promises it made "to help us care for our elderly patients and Texans with disabilities." (See " The Texas Medicare Manifesto ," February 2008 Texas Medicine .)

Dr. Hinchey's manifesto calls for a rational Medicare physician payment system that automatically keeps up with the cost of running a practice and is backed by a stable funding source. Tying physician fees to the MEI is one approach that would do that, he says.

The manifesto also urges Congress to withhold any future payment increases for hospitals, nursing homes, Medicare HMOs, or other Medicare providers until the physician payment system is fixed. He recognizes that won't be popular with hospitals and other providers, but he says it's a matter of fairness.

"I'm sure they're not going to like it. I'm sure they're going to oppose it," Dr. Hinchey said. "But our costs are going up; our reimbursements are not keeping pace with inflation. It's making it harder and harder to keep our doors open or, in some instances, to open doors to this patient population."

AMA may not be ready to sign on to that approach, however. Dr. Rohack says he sees danger in getting into a "food fight" with hospitals, health plans, and other health care professionals over their respective shares of the Medicare pie because "it doesn't reflect what the real problem is, which is they need to make the health care pie bigger." 

Action Now  

The final three planks of Dr. Hinchey's manifesto call for reining in spending on Medicare Advantage plans; stopping unfunded mandates, such as requiring the use of electronic prescribing or electronic medical records; and action now. "We can't let six-and-one-half-years of inaction stretch into seven," he said in his Texas Medicine commentary.

Toward that end, TMA already has launched its campaign to win long-term plans to replace the SGR with a funding source that will keep pace with the cost of providing care. TMA has produced a series of flyers in English and Spanish you can give to your patients, as well as talking points physicians can use when speaking to senators or representatives about the SGR fix.

The flyers urge patients to unite with physicians to hold Congress accountable. "If Congress does not take drastic steps to fix the Medicare payment system, you may not have a doctor that 'you choose' in charge of your medical care," one flyer warns.

The flyers can be downloaded from the  TMA Web site

County societies can order them from the TMA Media and Public Relations Department by contacting Pam Udall at (800) 880-1300, ext. 1382, or (512) 370-1382, or e-mailing Pam Udall .

AMA also is ramping up for another fight over the SGR. It is working with state and national specialty societies to develop, coordinate, and executive a 2008 campaign plan.

Both Drs. Hinchey and Rohack say the one plus in Congress passing only a six-month fix for the SGR is it will be forced to deal with the issue early in the year and in the middle of the campaign season. They hope Democratic and Republican leaders will not want to go into the fall election campaigns with Medicare funding issues hanging over the heads of their congressional or presidential candidates.

Representative Burgess says the six-month fix clearly will bring some pressure to bear on Congress, but he is skeptical that it will make a difference in the final analysis.

"The six-month delay does put it right in the handbasket of the presidential political arena," he said. "If I were a pessimist, I would tell you that we will simply come up with some other six-month extension in June and just kick the can down the road a little farther because neither party nor their presumptive presidential nominees will want to have any part of dealing with this."

Representative Burgess says chances of a single fix for the SGR are slim. He says it will require short-term, mid-term, and long-term measures to phase out the SGR.

"We're just not going to be able to walk in there this year and say we solved the SGR," he said. "But we can say we put ourselves on a path to be rid of the SGR by a date certain."

He plans to reintroduce his legislation this year and hopes physicians will get on board to support it. He also told participants at the TEXPAC Grassroots Forum that he would introduce a "sense of Congress" resolution urging repeal of the SGR. He believes that if he can get roughly 300 cosponsors out of the 435-member House that pressure could be brought to bear on House Speaker Nancy Pelosi (D-Calif.) to push a permanent fix through that body.

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by e-mail at  Ken Ortolon .   


The View From Needville: Cows Listen Better Than Congress

Family physician Art Klawitter, MD, read the entire 276-page report to the Congress, "Assessing Alternatives to the Sustainable Growth Rate System," and came to this conclusion: "There is so much information, no one is listening. Overhead, salaries, supplies, insurances have not been frozen; only the fees were frozen that when generated have to go first to pay overhead."

The Needville practitioner and TMA secretary/treasurer says physicians "aren't moving into the inner cities and rural areas not because there aren't enough residency slots, you need to pay them."

TMA improved the liability climate, he adds, "but primary care doctors are not clamoring to go to rural areas. Physician assistants were going to staff rural health clinics, to provide for those rural areas. Now, more are working for specialists and subspecialists in the city because they pay them. Specialists are doing the same self-defeating things primary care did years ago trying to generate more charges to stay afloat. We have jumped through hoops trying to justify our charges with longer notes to the point the medical record becomes worthless as a reference for patient care."

Furthermore, he says, "We stack our schedules so full we can't see the injury or the illness the same day that may keep them out of the emergency room or hospital, that would ultimately save money in the system and provide better continuity of care for the patient. We spend countless hours filling out forms for the Family Medical Leave Act, workers' compensation, insurance requests, jury duty excuses, schools, and disability and nursing home policy reimbursements, none of which we get paid for and which detract from the time available for patient care. This week, I had a new one, a form to sign that I had in fact completed the first form they sent me; I guess they didn't believe a doctor would fill out the 44 different items requested."

Dr. Klawitter says he didn't expect to get rich practicing family medicine, "but I didn't expect to be taking home less than my plumber does." He knows what his plumber earns because he talked to him at a recent birthday party.

"I would dare say we need a 40-percent update just to get us even with where we should have been had we gotten regular updates that covered overhead and cost of living," he said. "The only way I see we can induce more physicians into primary care, which should also save money, is to pay them. This is not in any way a call to readjust the pie. We have to make the pie bigger with savings from Medicare Parts A, C, and D, or with increased appropriations; after all, they created a whole new drug benefit under the conservative Congress."

Dr. Klawitter is thinking of sharing a letter with his patients asking them to write their senator and representative and urge them to fix the problem.

"I am under stress because I don't know where else to turn," the letter says. "You have seen changes we have made to become more efficient and to effectively use time. I feel we run an efficient office and are constantly looking for economies to take advantage of, but if we continue under the irrational budget neutrality, or, worse, the scheduled 10%-plus cut takes effect, I don't know what decisions will be made, but the status quo will not be survivable."

Dr. Klawitter says the Medicare mess reminds him of the farmer who goes into the bank to borrow money for his next crop. "The banker looks at the poor performance through the drought and asks the farmer how he was able to get so far behind. The farmer replies, 'I had a real smart banker helping me.' This system is not our fault. We had some real smart bureaucrats and policy experts craft this mess. We don't necessarily need to lay blame but we need to get it fixed. We all have ideas, but no one is listening. When I tell my cows my problems, they will at least nod soulfully. It is only slightly better than just saying it to the wind.

"We are damn mad, and we aren't going to take it anymore. Where is the Complaint Department?"   


SCHIP Renewed for 18 Months

It took three tries, but Congress finally passed legislation renewing the State Children's Health Insurance Program (SCHIP) that President Bush would sign.

The bill extends SCHIP for 18 months through March 31, 2009, and gives some states additional funds to meet current SCHIP enrollment. Texas was not one of them because it is less generous with CHIP payments and thus has not run short on money.

The Democratic-led Congress previously passed two different versions of the SCHIP bill that would have boosted spending by $35 billion and covered an additional 4 million children. The program now covers roughly 6 million people, including children and some low-income adults.

President Bush vetoed both earlier bills because they would have paid for the SCHIP increases with an increase in federal tobacco taxes and because he saw it as a move toward more government health coverage.

The American Medical Association applauded Congress for keeping the program alive for another 18 months. "Continuation of this important program is critical to ensuring that America's children have access to needed health care services," said Edward Langston, MD, chair of the AMA Board of Trustees.

The Bush administration and some congressional Republicans opposed the Democrats' plan to expand SCHIP, saying it would move some children from middle-class families from private health insurance to government coverage.

U.S. Rep. Michael Burgess, MD (R-Texas), says the Democratic proposal would have moved SCHIP "far beyond" its original intent.

"Clearly, they were going into the middle class," he said.

Representative Burgess says the bill that passed ensures that no one will lose coverage. 

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