Health for life

Dont underestimate the physician dismay over the looming "Doc Fix" debacle. Unless some budget compromise gets hammered out, Medicare is about to stick it to a lot of docs.

Ever since the passage of the Balanced Budget Act of 1997, Congress has been repeatedly delaying a yearly mandated cut in Medicares physician fees. That statutory reduction has been slowly accumulating through no fault of the physician community and is now estimated to be more than 27%.  Assuming most physicians practices are made up by a majority of Medicare beneficiaries, that represents a huge hit to their cash flow. KHN has a good summary of the partisan mutual assured destruction that has led us to this crisis here.

The docs are not happy:

From the AMA ("shameful"):

"Congress has again failed to fulfill its responsibilities. It is shameful that patients and physicians are the collateral damage; the citizens of this country deserve better. Congress had the entire year to repeal the broken physician payment formula and provide stability for the millions of seniors...who rely on Medicare... but has failed to act. It is long past time for members of Congress to act decisively and protect access to care for seniors..."

From the American Academy of Family Physicians ("outraged"):

“The American Academy of Family Physicians is outraged that Congress failed to prevent the 27.4 percent Medicare physician pay cut mandated by current law. That failure has presented their elderly and disabled constituents a bitter holiday gift — uncertainty whether their physicians will be able to provide the services they need."

A family physician blogger ("very upset"):

"I have talked some of my colleagues and some of my patients, and all of us are very upset about this. Some of my physician friends are really thinking this time about completing the necessary paperwork to stop accepting Medicare patients. How can any business (except government) run with such uncertainty as not finding a permanent fix to the broken current Medicare system. Patients will be unable to see their physicians, resulting in delayed care, increased hospitalization, and illness."

 From an email that was forwarded to the Disease Management Care Blog:

"Who can help us? 28% cut are you kidding me, some of us cannot sustain the disruption of cash flow.
I had a great home equity line on my house, but it was closed (not just frozen) because my bank just got taken over by the feds."

Observers may believe that the fallout will be limited to the small-business physician-owned practices and that the larger systems with salaried physicians will be able to carry on.  That would be a mistake.

Within each large provider systems, clinical "work units" are still responsible for meeting revenue expectations which, in turn, are tied to physician salaries and non-physician support staff.  A fee schedule cut courtesy of Medicare will be just as much of a problem for them too.

How will both the physician-owned and salaried practices respond?  The DMCB predicts that most will conclude that seeing more Medicare patients (volume) will not make up for the reduction in fees.  As has been noted by persons far wiser than the DMCB, "if youre losing 25 cents on every watermelon you sell, you cant make up for it by selling more watermelons."

As a result, both physician-owned and salaried practices will limit access by Medicare patients. Most will probably continue to see their active and established Medicare patients, but they will functionally "deactivate" their other Medicare patients and decline to take on new ones.  Theyll then "backfill" those open appointment slots with patients who have better insurance.  Heres how its done.

The DMCB will close with three additional thoughts:

1. If rates go down by 27%, there may be increased merit to the notion of "balance billing."

2. "Concierge practices," thanks to this stand-off, just got a lot more attractive to thousands of physicians.

3. Now would be an opportune time for the population health management community to close ranks and communicate with their legislators on behalf of their physician partners.

According to the Kaiser Foundation, health care costs are continuing to go up. Assuming Uncle Sam is doing everything he can to "increase efficiency" and "reduce waste," what are the options that can quickly control costs?

Its simple: leverage the insurance companies or the providers or both.

1. Tell the insurance companies what they can charge: While the ability of the Feds to regulate insurance remains murky, the Affordable Care Act enables CMS to require that insurance companies "justify" a premium increase of 10% and keep their administrative costs below 15%.

What is less appreciated is that the Medicare premium support plan being championed by Republican Paul Ryan is a variation of this same strategy. Thanks to a voucher that is indexed to the rate of inflation, insurance companies would be essentially told what they can charge for the bulk of their insurance. If the health insurers need to charge more, theyll have to wrestle that out of the beneficiary.

2. Tell the providers what they can charge: For an excellent example of this at the state level, check out this article in JAMA that describes Massachusettss just-passed law that aims to control the Bay States $9278 per capita health spending. Large providers (with more than 15,000 patients or $25 million in revenue) are now subject to cost controls that are tied to the states inflation rate.  Enforcement mechanisms will include "performance plan" reviews for violators, public reporting and the threat of civil penalties.

Of course, Medicares fee schedule functionally dictates what providers can charge for their services at the federal level, but up until now, Congress has been unwilling to leverage that. While a softer and gentler approach of "upside risk arrangements" and "global fees" are being developed, the paranoid DMCB suspects that theyll be ultimately calculated to cover a predetermined charge that is supplemented with a small profit margin.

While Democrats and Republicans have been supportive of a limited number of options ultimately lecting their ideology, the DMCB predicts that, over time and with a worsening fisc, both parties will converge on using all of the options described above.  Thats because theyll have no choice.

Heluva way to achieve bipartisanship, but there you go.