Let Me Say It Again: Congress Will Not Slash Medicare Payments to Physicians

Summary: Opponents of reform will continue to pretend that at some point in the future, “Obama-care” will mean drastic across-the-board cuts in reimbursements to doctors who take Medicare patients, forcing many to abandon their patients. The Senate’s bi-partisan action on Friday should serve as a reminder that this just isn’t true. Congress never has and never will implement the blind cuts that the SGR formula calls for. The SGR has nothing to do with the reform legislation President Obama signed in March. In fact, the Affordable Care Act hikes payments to many physicians.

 Friday, June 18, the Senate aproved a plan that blocks a 21 percent cut in Medicare payments to physicians; the axe was scheduled to fall that day. Leadership on both sides of the aisle pushed for the reprieve; it will remain in place for six months. The measure will now need to be considered by the House, which in May approved a fix that would last longer. If the House agrees that the cut should not be implemented–and it is all but certain that it will–the 21 percent cut wil be replaced with a 2.2 percent pay hike. The bill will not add to the deficit. The proposal is fully offset by changes in Medicare billing regulations, antifraud provisions and the tightening of some pension rules, eliminating Republican objections that it would push the federal government deeper into debt. The only question is whether the House will demand a full repeal of the SGR formula which calls for a 21 percent cut, or at least, a much longer repreive.

In six months, Congress will have to consider the matter once again, just as it has ever year since 2003.  This is the third time this year that Congress has averted Draconian cuts to physician’s payments. What, you might wonder, is going on?  Here is the back-story:  in 1997, Congress enacted a so-called "sustainable growth rate" (SGR) mechanism to keep Medicare physician reimbursement rates in check. Congress has never allowed the full cuts called for under the SGR formula to take effect and it never will.

Why don’t legislators simply repeal the cuts to doctors’ fees that they have been postponing for years?  Why just put off the measure for another six months? 


 Because too few of our elected representative possess the chutzpah to  stand up and say that blind across-the-board cuts were an extraordinarily dumb idea in the first place. Nevertehless, most legilsators undersatnd that this crude solution will never be implemented. They know that while Medicare overpays for some servcies, it underpays many doctors. The "Affordable Care ACt" that President Obama signed in March recognizes this fact; this is why it provides a 10 percenet bonus for primary care doctors (pediatrics, internal medicine, family practice, geriatrics) as well as general surgeons who practice in areas where medical professionals are in short supply. At the same time, Medicare is reducing reimbursements to doctors who have purchased or leased testing eqipment worth more than $1 million for their offices. Reserach shows that in such cases, doctors order twice as many tests, exposing their patients to unnecessary risks.

 Nevertheless, physicians who oppose  they like to call “Obamacare” will use Friday's postponement to scare seniors by pretending that a sword still dangles over their heads.  “I may have to stop seeing you,” some physicians will say. “This reform legislation is going to lead to a Medicare meltdown.”  Saturday, the day after the Senate approved the reprieve, the Washington Post ran an op-ed by Dr. Michael Newman, a clinical professor of Medicine at George Washington University , who wrote as if the postponement were merely a ruse, and that at some in the future Congress plans on enacting a “21 percent reduction [that] will make it prohibitive for many physicians — internists, geriatricians and family practitioners in particular — to continue caring for their Medicare patients. Congress's annual moves to postpone further cuts in reimbursement amount to budgetary cosmetics that convince no one of the system's soundness.” http://www.washingtonpost.com/wp-dyn/content/article/2010/06/18/AR2010061804700.html Newman did not mention the scheduled 10 percent bonus for internists, geriatricians and family practitioners, nor did he mention the 2.2% pay increase that replaces the 21 percent cut.

It’s worth emphasizing that health care reform has nothing to do with the SGR formula that calls for whacking Medicare reimbursements. As noted, this ill-conceived law passed in 1997, long before today’s reformers came on the scene. At the time, legislators never thought it would lead to enormous cuts. The SGR formula compares growth in Medicare payments to physicians to GDP growth. In the late 1990s, GDP was growing nicely. It wasn't until 2002 –five years after the legislation was enacted–that the formula called for a reduction in doctors' fees. In the years that followed GDP growth remained sluggish, and the deferred cuts built to 21 percent.

 Congress did not attempt to repeal the SGR as part of the Affordable Care Act because conservatives would have argued that this made reform too expensive. But everyone understood that legislators would address the SGR in separate legislation, and now it seems that they are figuring out how to cover the cost of a repeal without adding to the deficit.

In the end, many physicians will benefit from the reform legislation. Granted, some specialists well see reimbursements trimmed for selected very lucrative services. But under reform, all physicians will be eligible for bonuses if they deliver safer more efficient care that lead to better outcomes for patients.  And financial incentives that encourage better collaboration among physicians should improve working conditions for many.

16 thoughts on “Let Me Say It Again: Congress Will Not Slash Medicare Payments to Physicians

  1. This is not from me but from my PCP. “So we are to be comforted that the rate cuts will never happen because congress is too intelligent to ever do something as stupid as enforce a bill they passed. Sorry, but the way I see it, the sword is still hanging there. I think it is there to make physicians accept low rate increases so they can say, ‘well you only got a 2% increase, but at least you didn’t get a 21% cut.’ As for the 10% incentive that primary care will get… that is as illusive a carrot as the is the 21% cut. Sorry, I simply just do not trust any of them, especially the ‘just say no to everything republicans’ who spent like drunken sailors through the Bush years and now have gotten religious on not spending to fix the mess that they got us into.”
    As if the two step shuffle of private insurance regulations are a piece of cake!?

  2. Greg–
    What your PCP clearly doesn’t understand is that when the bill passed in 1997, no one thought it would lead to huge cuts in physician’s pay.
    The SGR formula compares the growth in Medicare payments to doctors to the growth of GDP per capita. It was created to try to make sure that Medicare payments to docs aren’t growing faster than GDP.
    In 1997 GDP per capita was growing at about 4% a year–and payments to physicians were not growing more than 4%. (In the middle of the 1990s, physicians were doing fewer tests and procedures. Private insurers’ payments to physicians also weren’t growing that fast, and total health care spending, as a percentage of GDP was flat.)
    Health care inflation didn’t really heat up until after 2000.
    But in 2000, the stock market bubble collapsed and then the economy began to slow.
    Still, the SGR formula did not call for cuts in doctors fees until 2002–five years after the bill was enacted.
    But once the economoy slowed, the SGR formula began to call for significant cuts. When Congress saw how steep the cuts would be, it voted against implementing the formula.
    The cuts were postponed, year after year, and finally the accumulated cuts deferred cuts totaled 21%.
    So Congress never intended drastic cuts. Your PCP is simply wrong about that.
    I still say that the formula is “dumb” because it calls for across-the-board cuts without differentiating between docs who earn more and charge huge sums for certain services vs. docs who provide greater benefits to patients, but are paid less.
    But back in 1997, people weren’t talking about how important primary care is. (Health care reformers have been calling attention to that fact in recent years..)
    Back in 1997, many Americans thought their cardiologist should be paid 3 or 4 times more than PCPs. Many people prefer going to specialists –they hated being told they needed to see a PCP first. So no one wanted to talk about cutting fees for some specialists and raising them for PCPs.
    It’s ironic that your PCP says he/she doesn’t like the “just say no to everything Republicans” when he/she is being used by the Republicans to fear-monger that reform will lead to drastic cuts in fees to physicians.
    Your PCP has swallowed the Republican’s propaganda, hook, line and sinker.
    And I have to say that when you look at how low general inflation is, this year’s 2 percent increase is not bad.
    The average worker did not get a 2% raise this year–or last year, and probably not the year before that.
    People on social security are not getting any cost-of-living adjustment this year.And for 60% of them, SS represents 75%–or more–of their income.
    I understand that some PCP’s are underpaid. Though median income for a PCP—$176,000– puts a mid-career PCP in the top 3% to 4% on the income ladder. . .
    It’s the PCPs earning $115,000 while still carrying $150,000 in med school loans who are squeezed.
    Finally, the 10% bonus will happen–it’s the law–unless conservatives manage to repeal the health reform bill.
    I’m afraid that your PCP is helping them do just that by fear-mongering about the legislation.

  3. Jenga–
    Point taken– insofar as the House would like to permanently repeal the SGR, or at the very least, kick the can much further down the road.
    When I said that that it’s “all but certain that the House will agree” I meant it’s all but certain the House will agree that the SGR cuts should not be implemented. (I’m making a revision in the top of the post so that’s clear–thanks for calling this to my attention.)
    Pelosi may fight the Senate for a stronger bill, though I’m not sure how far she will get. I think probably most Republicans would vote against a repeal of the SGR, as would some moderate Democrats.
    Conservatives like preserving the fiction that they’re being tough about spending–without actually getting tough with doctors. . .
    On staying away from Medicare,I hate to break it to you, but private insurers also plan to cut fees to many specialists.
    They’re already following Medicare on slashing fees for testing.

  4. The politics of this SGR mess is leaving a bad taste for all doctors.They held payments for 6 weeks so far this year, this causes insecurity. Though the health care legislation has nothing to do with SGR mess that started in 1995 or so, doctors are blaming Obama which just reflects frustration and need to blame someone. Amazing how many doctors on Sermo actually blame Dems more on than Repubs when SGR was passed under Repub controlled congress(clinton was president). Obama actually took time during campaign and voted to avoid these cuts in 2008 while Mc Cain did not show up.

  5. Ray–
    I agree that holding up payments for 6 weeks causes insecurity.
    Though after 13 years, (SGR was passed in 1997) one would think that doctors woudl realize that Congress is never going to implement these cuts.
    I realize that the AMA has done its best to stir up paranoia among doctors and patients . .
    But if doctors were paying attention they would realize that
    a) as you say the SGR was a REpublican formula. There is no reaons to blame Democrats
    and
    b) When it was passed in 1997, NO ON THOUGHT IT WOULD LEAD TO BIG CUTS.
    The SGR ties increaes in doctors’ payments to growth of GDP. AS long as Medicare payments to docs aren’t growing signicantly faster than GDP, everything is fine. No cuts. Docs get increaes instead.
    In 1997 GDP was growing at about 4% a year. It wasn’t unti 2000 that the economy slowed under the Bush administratoin.
    And the economy stayed sluggish.,
    So in 2002 (FIVE YEARS AFTER THE SGR FORMULA PASSED) it suddenly called for a cut in fees to doctors– and continued to call for cuts in subsequent years.
    Even under the Bush administration, Congress didn’t implement the cuts. But Republicans refused to repeal the SGR legislation because they wanted to maintain the fiction that they are fiscal conservatives (even while they were spending money wildly in various areas.)
    And now Republican and moderate Democrats in the Senate are stil refusing to repeal it. They like the fact that docs are blaming Obama and the Democrats, and that most Americans confuse the SGR with the health reform legislation.
    That’s what all of this is about.
    I wish more doctors would read this post, understand the history of the SGR, and understand that NO ONE is going to slash doctors’ fees across the board.
    I realize postponements in payments are frustarting and will make book-keeping time-consuming.
    But don’t blame the liberals or Obama. And don’t be anxious.
    MedPAC, Obama, ORszag, Berwick have all been very clear that the SGR formula should be scrapped. And it will be.

  6. First off, I don’t blame Democrats. I’m one of few doctors I know in a red state who can find some good in the ACA.
    However–
    1. When you say: “I realize postponements in payments are frustrating and will make book-keeping time-consuming”
    you grossly oversimplify.
    If you run a business and 75% of your income is “held” for 2+weeks, it’s more than just “time consuming for book-keeping.”
    It means having to take out loans or lines of credit to pay employees and all other parts of overhead. And if this happens multiple times in the course of a year, it becomes extremely troublesome.
    2. It does not matter what SGR was intended to do. The fact is, that cuts have been occurring for several years. The income tax was not “intended” to be the source of revenue that it is now. Social Security was not “intended” to be as big as it is now. Think those are going away?
    Me neither.

  7. Sorry Maggie, when you are in charge eventually you have to answer. I never blame the previous surgeon. It is a sign of weakness and never solves the problem at hand. Real leaders don’t continue to blame circumstance. They solve problems, period. That being said, a large group of doctors (myself included) WANT this cut to go through. It’s time to show everyone what healthcare reform is truly all about.

  8. Maggie,
    What needs to be explained is how come the SGR fix was not included in the initial health care reform legislation in the first place. I suspect that it would have turned the whole packages budget neutrality into a net loser and therfore subject to criticism as another big goverment plan without money to pay for it. Maybe this is political reality, but it does seem like slight of hand to come back after the bill is passed and try to get the SGR repealed. If my memory serves me right, the CBO determined the budget neutrality predicated on the 21% decrease in physician payments, resulting in a clearly underfunded program in the long run, if you assume the physician rates could not stand as you acknowledge and the democritc leadership promised. As much as I depise the Republicans behavior and two faced behavior on most issues, they seem to have a point.
    I frankly am fed up with the budgetary games both parties engage in (I recall the Republicans seem to be in cahoots with the CBO when the Medicare part D plan was passed and it suddenly estimated billions more in cost after it was passed).
    Explain why the Republicans should give in to such deception if indeed the budget neutrality selling point of the plan involved the 21% physician cut that everyone knew could not take place without irreparable harm to the meidcare program!

  9. Keith. I am certainly no apologist for any republicans being in cahoots with the CBO when the Medicare part D plan was passed, but in regards to cancer medicine, cancer patients receiving chemotherapy have not noticed a restriction in their access to treatment, despite the act’s significant reduction in government reimbursement to medical oncologists, according to a study by researchers in the Duke Clinical Research Institute (DCRI).
    “Critics of the MMA often said that it would reduce patients’ access to chemotherapy services, because doctors would receive 30 to 40 percent less reimbursement from the government for administering treatment,” said Kevin Schulman, M.D., director of the DCRI’s Center for Clinical and Genetic Economics, and senior investigator on the study. “Our study showed that patients actually do not perceive barriers to their access to chemotherapy and perceptions about access are really the same among patients who received treatment before the legislation went into effect, and those who received it afterwards.”
    The team’s findings were published in the print edition of the journal Cancer. The study was funded by a grant from the National Patient Advocate Foundation’s Global Access Project, which brings together 42 national healthcare stakeholder groups — such as pharmaceutical companies and advocacy groups — to fund health research projects. The Project has focused on examining the MMA’s consequences for patients, providers and healthcare systems.
    The Duke researchers examined the results of 1421 surveys completed via the internet by 684 patients who had received chemotherapy prior to the enactment of the MMA and 737 patients who were treated after it went into effect. Respondents answered questions related to issues including the amount of time they waited to start chemotherapy after their initial cancer diagnosis, and how far they had to travel to get their treatments.
    “When the act was passed in 2003, many doctors and patient advocates were concerned about the consolidation of services it might necessitate, such as the moving of chemotherapy services to hospital rather than outpatient settings and the elimination of staff positions,” said Joelle Friedman, a DCRI researcher and lead author on the paper. “They were afraid these changes would affect patients’ access to care, but our study showed that these concerns turned out to be largely unwarranted.”
    About half of the patients surveyed in each group were under the age of 65 and half were over 65. The majority of patients in each group reported being either satisfied or very satisfied with the care they received from their oncologists, Friedman said.
    The researchers also found no difference in the amount of time from diagnosis to initiation of chemotherapy between the two groups; the median lapse in time was 22 days in both groups, Friedman said.
    Patients reported an average travel time of 30 minutes to the location of their chemotherapy appointments, both before and after the implementation of the act, she said.
    The speculation that treatment location would change — that patients would either be forced to travel farther for therapy or switch treatment locations in the middle of therapy — also proved to be unfounded, Friedman said.
    The MMA represented the largest overhaul of the Medicare system since it was created in 1965. Changes included a new prescription drug benefit, and a $25 billion allocation of funds to rural hospitals. One key provision, however, was a significant reduction in Medicare reimbursement to healthcare providers. Oncologists were strongly affected, due to a perception (proven a reality with the joint Michigan/Harvard study and the “Patterns of Care” survey) that they had been over-compensated in the past.
    Granted, the new Medicare D program was filled with lots of holes. The biggest problem was in designing the program. This previous administration did not want the Medicare drug benefit to be administered directly by the federal government (where Medicare is run efficiently). Instead, it devised a public program run by hundreds of competing private plans, each with its own prices and coverage policies.

  10. Maggie. All true, but I would look further into thinking that PCPs are doing well at $176,000. They have no problem admitting that they are in the top tier of earnings, however, a number have spent a lot of time and money to get there. A lot more time and money than some who went into wall street and made tons more. My oldest brother was lucky by receiving a scholarship (the brains in the family), but some I know have over $250,000 in schooling costs and were not able to get into the work force until their late twenties. I can’t tell my PCP to drive a chevy instead of a beamer or a benz. He drives a Toyta Prius. He does not even come from Missouri, but he will believe it (pay raise) when he sees it!

  11. Keith, Frustated Dco
    Keith–
    The SGR savings weren’t included in the legislation because
    most people in D.C. understood that SGR savings was a fiction that Bush had used to make his budgets look less extravagant.
    When Obama first came into office, he did not include the SGR in his budget. He was very clear that these savings would never materialize.
    Republicans have tried to argue that without the SGR savings, health care reform legislation is unaffordable.
    This just isn’t true.
    But it is very hard to quantify just which provisons in health care reform will save how much money.
    To document that, you would have to mind-read how many players are going to respond to financial carrots and sticks that Medicare and insurers(who have said that they will follow Medicare)– and how much that will save over the next 10 years.
    In addition to mind-reading how people will react, you need to know what will happen to interest rates, GDP growth and inflation over the next 10 years.
    Good luck.
    The Congressional Budget Office esimates Zero savings from the Medicare reform programs in the legislation, –but they also say that they really don’t know and that, inevitably , any 10 year projection is wrong.
    Basically, CBO is saying : “We don’t know how to measure potential savings from this legislation”–which is true.
    We’re breaking new ground.
    Frustated doc–
    Actually, the income tax was intended to be a much, much, larger source of revenue that it is today.
    Take a look at income tax rates going back to 1930, Today’s income tax is a much, much lower share of income–particuarly for the rich.
    As for Medicare–When Medicare was passed, hospital charges were much lower and doctors were paid far less. Drugs were far less expesive. Medical devices barely exited.
    Since then hospitals and doctors have begun doing many, many more tests, procedures and surgeries–although, over the lst 10 years, while health care spending and utliziation has really escalated, outcomes are no better, and deaths, as a result of inadvertent errors due to medical care, have spiralled.

  12. Greg–
    You write that many primary care docs earning an average of $175,000 (with half earning more) “have no problem admitting that they are in the top tier of earnings, however, a number have spent a lot of time and money to get there. A lot more time and money than some who went into wall street and made tons more.”
    Greg, if they wanted to make “tons more” they should have decided to go to Wall Street.
    No one stopped them.
    They chose medicine, much as I chose writing.
    I could have made “tons more” if, in the 1980s or 1990s,I had taken an analyst’s jobs at a major investment bank. (To my surprise, head-hunters called me.
    Twice, I went to interviews at marquee name banks–butI just didn’t like the people and their objectives. Didn’t have the stomach to do what they wanted me to do. (Hype stocks Lie.)
    I went to the interviews just to see if I was wrong about they wanted me to do. I wasn’t.
    Today, some docs feel sorry for themselves because they are “only” in the top 2% to 3% and feel that they should make far more than 97% of all Americans.
    In those cases, I really think they just picked the wrong profession. Their fault. Can’t feel sorry for them. They should have chosen to become divorce attorneys.
    And I really hope that they are not my doctors.

  13. Maggie:
    You made some important points.
    And, thanks for providing your personal experience.
    It really gives a flavor to your premise.
    Isn’t it interesting that physicians can be in the top 3% of income, yet feel they need more.
    As you know, some of those desires are reasonable, compared to the costs involved in the education, training and experience, as well as the delay of income on the front end.
    Something has to change pretty soon, for how many people in the lower 80% are going to be able to pay physicians to make in the top 2-3%, as well as even more dollars for prescriptions and hospitals?
    Sure, we can continue subsidizing all the players to give them their just due, but where do the subsidies come from – an already exploding debt.
    To facilitate currenr demand by borrowing from future generations seems like a bad habit to get into (which we have pretty much done so long, it is part of our very character).
    Don Levit

  14. Spoken like someone that’s never been a doctor. How can you be an expert on who should be a physician when you haven’t went through the effort to be one yourself? It’s an opinion based on ideology and it fits a narrative. Since you passed up a job that payed much more, we should all think like you. That explains your post in one sentence.

  15. Don:
    You write: “Isn’t it interesting that physicians can be in the top 3% of income, yet feel they need more.
    As you know, some of those desires are reasonable, compared to the costs involved in the education, training and experience, as well as the delay of income on the front end.
    Something has to change pretty soon, for how many people in the lower 80% are going to be able to pay physicians to make in the top 2-3%, as well as even more dollars for prescriptions and hospitals?”
    Don–Thank you.
    I agree that younger doctors who are still paying off debts are often in a hard place financially.
    This is why I think we should subsidize med school education, certainly for all docs who want to go into areas where we need more doctors.
    That said,as you suggest, this is not about how much doctors deserve, but ultimately, about how much the rest of society can afford to pay them.
    On the top half of the physicians’ pay ladder, I’m afraid that we’re looking at a bubble.
    It’s not something that we can sustain. At the same time, very well-paid specialists have created lives based on the bubble
    expectations; we can’t just suddenly pull the rug out from under them.
    On the other hand, we cannot afford to feed the bubble for another 10 years. . .