Medicare pays physicians according to a fee schedule established
by Congress. This year, Medicare will pay the nation's 850,000
physicians a total of $92 billion, or roughly $108,000 per
physician. From this payment, physicians pay their nurses and
office staff, office expenses, patient record and billing costs,
and malpractice insurance. If any funds are left over, they can pay
themselves a salary. Looked at another way, of the 45 million
seniors cared for by Medicare, a little over $2,000 is allocated
per beneficiary to the physician community. The government will
spend about $520 billion on Medicare this year; 17% will go to
physicians, and the remaining 83% goes to hospitals, nursing homes,
laboratories, drugs costs, and the like.
Are doctors paid too much by Medicare? The government thinks so.
A formula was enacted in the late 1990s that set limits on the
total amount of money Medicare can pay doctors, and the agency that
runs the program has exceeded the payment cap. How much are we
talking about? From 1996 to the present, Congress authorized
aggregate payments of about $1 trillion dollars to physicians,
and that number has been overspent by $19 billion. That's a
1.9% cost overrun on a $1 trillion program over a 14-year
period. As federal programs go, one might think that being that
close to budget over such an extended period of time would be cause
for celebration. Instead, the law demands that the $19 billion
be paid back by America's physicians, and it must be paid back in a
single year. This has created a serious crisis, and it needs to be
fixed. Let me explain.
The 'Doc Fix'
If $19 billion must be reclaimed in a 12-month period,
physician fees have to be cut a staggering 21% in a single stroke.
And the law requires that this be the new baseline for future
years. Medicare today pays physicians, on average, about 20% to 30%
less than private insurance for the same services. With a 21% cut,
the gap would start to approach 50%. Everyone, including the
leadership of the Medicare program and the vast majority of
Congress, realizes that such a gap is unsustainable and will cause
physicians to leave the Medicare program in great numbers. Seniors
would find it difficult, if not impossible, to find care. No one
wants that to happen, and Congress will not allow it to happen. So
every year leading up to the present, Congress has refused to allow
the cut to occur. Instead, they have put a series of "temporary"
patches in place.
Due to
the failure to address this payment problem, today's cost of fixing
the physician payment scheme (the "doc fix," as it is referred to
inside the Beltway) is $247 billion. That number comes from
the $19 billion cost overrun extrapolated out to 10 years with
inflation costs built in. Some might wonder how a 1.9% cost overrun
over 14 years can cost $247 billion to remedy-such is the math
of the federal budget. But will it really "cost" that amount?
Congress will no doubt continue to appropriate the funds to
patch the system. The money will be spent. But if they don't
actually pass a doc fix, they don't have to count the
$247 billion against the nation's deficit. They simply pay it
out in dribs and drabs. It's the same money and the same ultimate
cost, but using this sleight of hand, the cost does not have to
appear in deficit forecasts and Congress looks more fiscally
responsible. The fact is that fixing this problem permanently will
require no more funding than will be expended anyway.
The Payment Roller Coaster
So what's the problem? Just let Congress apply a patch from time
to time and move on. Unfortunately, it's not so simple. Every time
the doc fix comes up for debate, it is used as leverage in the
discussion of deficits, health-care costs, and a host of other
issues. Just this year alone, Congress has passed four short-term
patches, two of them after the 21% cut actually went into effect.
Starting Monday, June 14th, doctors were paid 21% less than on June
1st. On June 24th, the House approved a 6-month plan to reverse
this 21% cut. But physicians, especially those who see lots of
Medicare patients, cannot run their practices while riding this
payment roller coaster. Cash-flow problems will start appearing in
practices within a week or two as bills come due for payment and
funds are not there. Long-term plans to hire staff or expand
services cannot be made when revenue projections are so uncertain.
The frustration that the nation's physicians feel over this issue
is entirely understandable.
If the can is kicked down the road for another 3 or 4 years, the
compound effect will make this "fix" cost in excess of
$400 billion. At that point, this problem will never get
solved and physician payments from Medicare will be a permanent
political football, subject to the whims and uncertainties of any
political process. Ultimately, physicians will figure out how to
remove themselves from this unstable system and withdraw from
Medicare. The damage to seniors from this eventuality will be
immense. In 2004, the doc fix would have "cost" $49 billion.
Today, it's $247 billion. Tomorrow, who knows, but two things
are certain: This problem has to be fixed or it will ruin Medicare,
and it will never be cheaper to fix than today. That is why ASCO is
fighting to get this done. ■
-Allen S. Lichter, MD
© 2010. American Society of Clinical Oncology. All Rights
Reserved.
