BLOG Medicine

AMA Sounds the Alarm, Medicare Making Yet Another Attempt to Cut Reimbursement

The American Medical Association (AMA) must once again don its armor, this time preparing to go to battle on behalf of its approximately 240,000 members over pending cuts to Medicare reimbursement.  Physicians received below-inflation updates in 2004 and 2005 and zero percent updates in 2006 and 2007.

Without congressional action, Medicare physician payment rates will be reduced 10 percent effective 1 January 2008.  By 2016, the cuts will total about 40 percent, while practice costs are expected to increase by 20 percent.

In addition to steep pay cuts, the AMA charges that the Medicare physician payment update formula:

• has kept average 2007 Medicare physician payment rates about the same as they were in 2001
• prevents physicians from making needed investments in staff and health information technology to support quality measurement
• punishes physicians for participating in initiatives that encourage greater use of preventive care in order to reduce hospitalizations
• has led to a severe shortfalls in Medicare’s budget for physician services that have driven Congress to enact short-term interventions with funding methods that have increased both the duration of cuts, as well as the cost of a long-term solution
• hurts access to care for America’s military families, has payment rates in the Department of Defense’s TRICARE program are tied to Medicare rates

An AMA Physician Payment Action Kit is available for more information and the AMA Physician Grassroots Network to receive updates on physician payment rate legislation.

The impacts of Medicare physician payment cuts in New England are significant:

• New England physicians will lose $306 million for the care of elderly and disabled patients in 2008 due to the 10 percent cut in Medicare payments beginning 1 January.  The region's physicians will lose $12.1 billion for the care of elderly and disabled patient by 2016 due to eight years of cuts
• 149,461 employees, 2,007,382 Medicare patients and 234,343 TRICARE patients in New England will be affected by these cuts
• 42 percent of New England's practicing physicians are over 50, an age at which surveys have shown many physicians consider reducing their patient care activities

	CT	ME	MA	NH	RI	VT
Losses in 2008	$92 million	$27 million	$137 million	$22 million	$18 million	$10 million
Losses by 2016	$3.7 billion	$1 billion	$5.4 billion	$860 million	$720 million	$380 million
Affected:
Employees	39,803	13,671	63,187	14,144	11,613	7,043
Medicare Patients	485,970	220,081	884,894	170,937	155,540	89,960
TRICARE Patients	51,403	46,849	70,159	28,786	24,818	12,328
Physicians Aged 50+	42%	46%	38%	43%	37%	43%

• Compared to the rest of the country, Connecticut, Massachusetts, Rhode Island, and Vermont, each at 14%, has an above-average proportion of Medicare patients
• Compared to the rest of the country, Maine, at 17%, has the second highest proportion of Medicare patients and, at 17 practicing physicians per 1,000 beneficiaries, has a below-average ratio of physicians to Medicare beneficiaries, even before the cuts take effect
• In 2008, on top of the 10 percent cuts across the country, the "Southern Maine" Medicare payment area faces cuts of an additional 1.1 percent, the "Rest of Maine" Medicare payment area faces cuts of 2.1 percent; New Hampshire faces cuts of an additional 1 percent; and, Vermont faces cuts of an additional 1.7 percent

Countering the congressional inaction and the resulting 10 percent rate cut, the AMA is advocating a 1.7 percent increase in reimbursement in 2008, in line with the estimated practice cost increase; long-term, the AMA wants Congress to create a new reimbursement formula.

Over-stepping their role as a payment mechanism and forgetting that they're not actually providers of medical care, the talking-heads of the health insurance industry charge that physicians are partly to blame, contributing to costs by ordering unnecessary and expensive services.  Mohite Ghose, spokesman for the insurance trade association, America's Health Insurance Plans, was even disingenuous enough to question whether physicians are always providing "appropriate services at the right setting at the right time."

BLOG Medicine must concur with the AMA's statement that, "utilization of physician services is not the cause of the Medicare program's financial predicament, and cuts in physician payment rates are not the way to improve Medicare's financial sustainability."  Congress needs to bring up the house-lights and call a close to this "annual dance of death" -- it's time to pay the piper.■

Regional Differences in Costs and Care

The Dartmouth Atlas of Health Care, a project run by the Center for the Evaluative Clinical Services at Dartmouth Medical School, works to accurately describe how medical resources are distributed and used in the United States.  The variation in quality and cost of health care is a result of many complicating factors, but it's geography that determines your chances of undergoing certain surgical procedures, how often you visit the doctor, and whether you die in a hospital or at home.

For example, Medicare patients living in New York undergo knee replacements at a rate of 5 in 1,000 people.  In Ohio, the number rises to to 8 in 1,000 while the national average is 7 in 1,000.  Female Medicare enrollees who receive a diagnosis of breast cancer have three times the chancing of having a mastectomy in Rhode Island, where the rate is .9 in 1,000, as they do in Vermont, where the rate is .3 in 1,000.  Per year health care for the average Medicare patient costs $5,581 in Maine, $7,804 in Massachusetts and $7,225 in Florida.

In a recent New York Times article, Stephanie Saul states that such differences cannot be explained by rates of illness or cost-of-living deviations.  While some variation depends on personal preference and the advice that doctors give about risks versus rewards, much of the deviation, according to Saul, appears to be caused by "supply sensitive care," where the number of doctor visits and hospitalizations expand to the system's capacity.

In the article, Dr. Elliott S. Fisher, who studies healthcare economics and is a member of the Dartmouth research group identifies the way doctors and hospitals were paid as part of the problem.  However, patients in high-cost areas are not necessarily getting better care, but Fisher did find higher mortality rates in higher-spending regions.  Higher risk of infection, increased system complexity and resultant medical errors appear to be the cause.

An interesting solution offered by Saul involves an increase in primary-care doctors, citing research that indicates that costs go up and quality declines with increased physician specialization.  In fact, policy makers are noted as seeking ways to increase financial incentives for becoming a family doctor, internist or pediatrician, possibly by raising the payments doctors receive for patient evaluation & management (E&M) or creating a new reimbursement category for coordinating care.■

HHS Value Exchanges to Report on Quality and Cost

On 28 February 2007, US Department of Health and Human Services (HHS) Secretary Mike Leavitt unveiled a plan for chartering local collaborative organizations that will assess the performance of local health care providers and publicly report the findings.  The plan would bring the local collaboratives into a nation-wide system, and use nationally recognized standards to measure and improve quality of care in their local areas.

HHS would charter select qualified regional collaboratives as Value Exchanges.  In such collaboratives, local area physicians, nurses, hospitals and other health care providers work with health plans, employers, unions, and other health care purchasers to achieve reliable public reporting on quality and cost of care.  As HHS-chartered Value Exchanges, they would continue to focus on quality improvement and would provide public reports on the performance of providers in their area.

The Value Exchanges would use nationally recognized standards developed through public-private efforts that also form the basis for ongoing Medicare quality and performance reporting.  The Exchanges could also pioneer new quality improvement strategies and share results through the Medicare Learning Network.

The HHS's Agency for Healthcare Research and Quality (AHRQ) will administer the new system, but providers will lead in the development of standards.

Leavitt said that the goal is to achieve both national coordination in developing standards and local control in applying them.■