War Over Medicare's Physician Fees

A major battle ensued in Congress last week over proposed legislation to halt a statutory 10.6% cut in Medicare payments to physicians.* The democratic-sponsored bill (HR 6331) breezed through the House, but it fell a single vote short of the 60 needed to clear the Senate. HR 6331 also eliminates the 5.6% decrease in physician fees slated for January 2009 and institutes a 1.1% increase.

To cover the additional expense, HR 6331 would siphon billions over the next several years from the Medicare Advantage budget, and President Bush says that he will veto any legislation with such a provision. Medicare Advantage subsidizes private health insurance for Medicare-eligible recipients. Democrats set their sights on the program after the Congressional Budget Office reported that healthcare services provided through Medicare Advantage health plans cost the Centers for Medicare and Medicaid Services (CMS) 12% to 19% more in 2007 than equivalent services provided through traditional Medicare.

On one side of the battlefield are the private health insurers, the Bush administration, and Congressional republicans; physicians, backed by the American Medical Association (AMA) and Congressional democrats, stand resolutely on the other side. Senior citizens, individuals categorized as disabled, and many military veterans find themselves caught in the crossfire, with combatants on both sides insisting that should the other side win, healthcare options for Medicare enrollees will shrink.

The arguments

AMA predicts that decreased reimbursements will force many physicians to lay off employees, refrain from implementing new technologies, or cease practicing medicine altogether. In a 2008 AMA poll, 60% of AMA physicians said they would "limit the number of new Medicare patients they treat" if physician fee reimbursements were cut. Closing any more doors to Medicare patients could prove especially problematic in rural areas, where physician shortages are endemic.

Additional components of HR 6331

Private health insurers counter that forcing them to hold service fees in line with traditional Medicare prices—as HR 6331 mandates—would induce them to withdraw from Medicare Advantage, curtailing healthcare choices for Medicare enrollees. The insurers posit that this could greatly hamper care in those regions where few physicians treat Medicare patients. According to the Medical Group Management Association, 24% of physicians nationwide will no longer accept new Medicare patients.

Budget slashing may not be insurers' only problem with HR 6331. The legislation curtails their direct marketing activities, increases government oversight, limits the out-of-pocket burden they can impose on subscribers, prohibits certain penalties and premium increases for Part D coverage, expands the list of drugs they must cover, and requires them to pay interest on Part D drug charges reimbursed more than 30 days after submission. It also requires the plans to practice mental health parity, treating mental conditions the same as any other medical condition.

Many private health plans offered under Medicare Advantage provide lower levels of coverage than traditional fee-for-service Medicare. The insurance companies then sell their enrollees "supplemental" health insurance to cover the excluded services. HR 6331 would end this practice.

HR 6331 also funds the Medicare Part B assistance program for beneficiaries with the lowest incomes, which expired July 1. Absent new legislation, the $96.40 monthly premiums for Part B coverage will be deducted from subscribers' Social Security checks beginning in August.

What this means for doctors

Although reductions in physician fee reimbursements took effect July 1, CMS says it will not process any new claims until July 15, giving Congress time to reach a compromise acceptable to the White House. CMS already holds claims for 2 weeks, as required by law, and physicians worry that the 10-day hold will delay reimbursements even further. CMS insists this is not the case and makes the following recommendations:

• Physicians who submit Medicare claims for services on or after July 1 should use the physician fees in place prior to July 1.
• Copayments and deductibles collected from Medicare beneficiaries must be based on the reduced Medicare rate, regardless of the rate the physician charges to Medicare.
• To minimize confusion, consider holding Medicare claims until new legislation has been passed, if financially feasible.
• Physicians who use the reduced rates on new claims submitted to CMS after July 1 will have to submit a revised claim if Congress rescinds the cuts, retroactive to July 1.

What next?

Political strategists predict that because it is a major election year, legislators will not allow these drastic cuts to remain in place. Indeed, physicians' groups have already started putting the squeeze on those political candidates up for re-election this year who voted against HR 6331, withdrawing endorsements and canceling donations. A blitz of advertising has hit the airwaves and television, and news show audiences are being bombarded by pundits from both sides. To find out how this will play out, stay tuned for Medicare Wars, Round II, expected to resume July 7, when congress reconvenes after the July 4 holiday.

*For a summary of how CMS calculates reimbursements for physician fees, see "Congress Temporarily Turns the Tide on Scheduled 10.1% Cut to Medicare Physician Fees," in the January 2008 issue of SurgicalRoundsOnline.