Congressional Insanity: Cut Medicare by 21% but expand services?

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As of June 18, 2010 the Senate failed to postpone the 21% cut in Medicare and TRICARE. The postponement amendment failed to pass. If the amendment to postpone the cut would have passed it would have been attached to H.R. 4213 which was a larger jobs bill. The jobs bill with a smaller SGR fix also failed to pass and was defeated in the Senate, 56-40. The second jobs bill, with a shorter SGR payout raise failed to get enough votes to avoid a filibuster. That failure was the third time this year that Congress reviewed Medicare cuts. The AMA has warned that 60% of responding physicians who took their survey would have to limit the number of new Medicare patients if the 21% cut when into effect.  According the AMA, 30% of Medicare patients already have trouble finding a primary care physician. The Medical Group Management Association found that over 24% of group practices already limit new patients who have fee-for-service Medicare. However even though there is a pending 21% cut in fee-for-service Medicare, hospitals, Medicare Advantage Insures and nursing homes have continued to receive positive Medicare payment updates. Now here is a map of the US with reductions in payments just as of 2004:

Reductions in Medicare

Reductions in Medicare

H.R. 631 replaced a 10.6 cut with a 9% update in 2008 and a 1.1% update for 2009; however, it only gave an 18-month window for Congress to fix the looming 21% cut. The primary issue with the SGR formula, according to the AMA is that it is independent of the real cost of practice and does not follow the Medicare Economic Index or MEI. The SGR is based on GDP, and not physician costs. In contrast to the SGR, the MEI is based on actual physician costs and as such, the AMA believes the MEI should replace the SGR. Unless permanent action is taken, in the coming decade, physicians will face a 40% cut in their payment schedules. With such steep cuts in Medicare payment schedules, 24% of group practices have already taken action and limit how many new Medicare payments they accept.

A compounding problem

A compounding problem

These projected cuts may also affect the number of physicians in the workforce, as 51% of those physicians over 50 cite “insufficient reimbursements” as a “very important” factor in their retirement decisions. This is according to a statement by the AMA to the committee on ways and Means in the U.S House of Representatives, September 2008. H.R. 3961 covers physician fee changes, while H.R. 3962 freezes part B payment thresholds at 2010 levels through 2019. H.R. 3962 will also phase in changes for Medicare Advantage plans to 100% of fee-for-service costs from 2011 to 2013 with a 1.5% to 3.0% bonus payment to high-quality qualifying plans. Currently, Medicare Advantage plans pay up to 113% of Medicare fee-for-service costs.

According to the Henry J. Kaiser Family Foundation, H.R. 3962 adjusts the Medicare physician fee schedule as well as H.R. 3961. The new laws reduce Medicare payments to critical care hospitals for excessive hospital re-admissions. H.R. 3962 also directs the Secretary of HHS to develop outline strategies to bundle payments for a variety of services. Therefore, H.R. 3692 attempts to bundle formerly separate service payments for Medicare providers, while H.R. 3691 attempts to separate healthcare service categories and determine their payment rates individually, in contrast to formulating one payment rate and applying it to all Medicare service providers. Finally, here is a chart from 1995 to 2005 showing payment to cost ratios for Medicare, private payers and Medicaid.

Payouts compared

Payouts compared

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