This week, conservatives and liberals will face off on a question that has divided the Senate—and united the House:
- Should Medicare slash the fees that it pays physicians, across the board, by more than 10 percent?
- Or should it try to save money by trimming the subsidy that it now shells out to private insurers who offer Medicare Advantage? (Medicare pays private insurers 13 to 17 percent more than it would lay out if the government program cared for seniors directly. In theory, patients receive extra benefits that equal the bonus, though skeptics say insurers are simply pocketing extra profits. )
The battle began, in earnest, on Tuesday, June 24, when the House voted 355-59 to block a 10.6 percent pay cut for physicians which was scheduled to kick in on July 1.
In a stunning bi-partisan vote, the House decided to raise the money Medicare needs another way—by ending the private fee-for-service version of Medicare Advantage by 2011. (For Medicare, this is the most expensive version of Medicare Advantage: it costs the program 17 percent more than traditional Medicare, and as I wrote in December, insurers are not providing the quality of care that the Medicare Payment Advisory Commission (MedPac) expected. According to the Washington Post, the legislation could result in $14 billion less for insurers over five years.
When the Senate saw the House vote, Senators were astonished that the House was taking on the insurance industry. Earlier in June, Senate Democrats floated a similar bill, with little hope of success.
As Robert Laszewski recently pointed out Health Affairs’ blog: “No one expected it to go anywhere, and it didn’t — failing to advance in the Senate getting only 54 of the 60 votes it needed. Neither Obama, Clinton, nor McCain even bothered to show up for the meaningless vote.”
After all, President Bush has already said that he will veto any bill that touches the insurers’ subsidy. With that in mind, liberals and conservatives in the Senate Finance Committee didn’t even wait for a House vote: they worked out a bi-partisan compromise that would freeze 2009 physicians’ payments and make no changes to Medicare Advantage.
That way, everyone could go home for the July 4 recess happy.
But when Senate Democrats saw what the House had done, they announced that all bets were off. Senate Majority Leader Reid and the Senate Democrats decided to shelve the bi-partisan compromise and vote on the bill just passed in the House.
Two days later, Senators locked horns, late at night. As I reported last week, it was not a pretty sight. The Democrats missed getting the 60 votes they needed to pass the bill (which spares physicians by just one vote). At that point, Congress left Washington for its seven-day July 4 recess.
With the whole question about slashing physicians fees now up in the air, the Bush administration did the only thing it could do: Mike Leavitt, Secretary of the Department of Health and Human Services, announced a reprieve for the doctors who expected to be hit with a huge pay cut on July 1. The freeze was set to last 10 days.
This means that when Senators returned today (Monday, July 7) they had just three days to resolve the matter.
The office of Senate Majority Leader Harry Reid has announced that the Senate will vote on the bill again this week. Since the funeral for former U.S. Sen. Jesse Helms is likely to put the Senate out of commission tomorrow, probably the vote won’t come until Wednesday or Thursday.
Today, Senate Finance Committee chairman Max Baucus told National Journal that he believes that some Senate Republicans may change their votes. In a conference call, Baucus also said that he thought it was possible that President Bush might not veto the bill.
Medicare Needs the Money
Many Republicans have no interest in making enemies of the nations’ physicians—or Medicare patients. This is especially true of those who are up for re-election.
“Why not just go back to the original Senate bi-partisan compromise?” they ask. Rather than slicing physicians’ fees Congress could freeze them at current levels. It wouldn’t have to tinker with Medicare Advantage. No one would be angry.
It sounds reasonable, but here’s the catch: Medicare needs the money. This is the back-story that many in the mainstream press are ignoring. Medicare desperately needs to begin cutting the fat in its program.
As the independent Medicare Payment Advisory Commission (MedPac) pointed out in its March 2008 report, four years ago, the Medicare trust fund that pays for hospital stays began to run out of money: in 2004, it started laying out more than it takes in through payroll taxes.
“Since then, the balance in the fund, combined with interest income on that balance, has kept the fund solvent. But in just 11 years, it will be exhausted,” the MedPac report explains. “Revenues from payroll taxes collected in that year will cover only 79 percent of projected benefit expenditures.” And every year after 2019, the shortfall will grow.
Medicare simply cannot continue spending at the current pace. Without structural reform, the program is not sustainable. MedPac, a truly independent and outspoken panel, is clear on this point.
Moreover, MedPac reports Medicare is not getting good value for taxpayers’ dollars. As the panel put it in March: “The Commission is alarmed by the trend in Medicare spending—a growth rate well above that of the economy overall—without a commensurate increase in value to the program, such as higher quality of care or improved health status.”
Make no mistake: this is not an example of an inefficient government program spending hand –over- fist without caring whether it is getting a bang for the taxpayer’s buck. In recent years, health care prices have been spiraling–without an improvement in the quality of care that would justify levitating costs—in both the private sector and the public sector.
As this chart below from MedPac’s March report reveals, although rates of growth in per capita spending for Medicare and private insurers differ from year to year, over the long term the trends been quite similar.
Neither the public sector nor the private sector has found a way to rein in runaway health care inflation.
Inevitably, some have suggested that Medicare’s financial problems could be solved if only the elderly had more “skin in the game” in the form of higher co-pays, deductibles and premiums.
But, in fact, Medicare is already asking seniors to pay more than some can afford.
Premiums from beneficiaries finance twenty-five percent of Medicare, Part B, which covers physicians visits and outpatient care. (General revenues finance the remaining 75 percent; at this point Medicare Part B consumes 10 percent of all personal and corporate income tax revenue.)
Between 2000 and 2007, Medicare beneficiaries faced average annual increases in the Part B premium of nearly 11 percent. Meanwhile, monthly Social Security benefits, which averaged around $900 per month in 2005, grew by about 3 percent annually over the same period
Then there is the deductible. Before 2006, lawmakers rarely increased Part B’s annual deductible. But that year, they raised it to $110 and it now goes up, each year, at the same rate as growth in Part B spending per person. (Seniors are now paying $135.)
These may not seem like large sums.
But the truth is that most seniors have very little discretionary income. As MedPac notes in a 2007 report about half of Medicare’s beneficiaries have incomes (from all sources, including savings) of about $20,000 or less. Eighteen percent earn less than what the government defines as the poverty level ($9,060 for people living alone and $11,430 for married couples.) And 49 percent are living on incomes that put them at 200 percent of the poverty level- — or below.
(“Income” includes every dollar that comes into the senior’s home, including Social Security, dividends and capital gains, Food Stamps and any income from part time jobs.) In 2005, Social Security payments equaled 50 percent or more of annual income for about 65 percent of elderly recipients.
Squeezing seniors is not the answer. Medicare needs to find another way to put itself on a sound financial footing.
The good news is that it can be done. There is enough waste in Medicare spending (as there is private sector health care spending), to cut our health care bill by a third–and simultaneously improve quality. The question is this: does it makes sense to take an ax to physicians’ fees, trim Medicare Advantage, or look elsewhere for the funds needed?
What Will Happen This Week?
No surprise, the American Medical Association backs the bill that would spare the doctors, warning that if Congress agrees to the scheduled cut, many physicians will stop taking new Medicare patients. Some may even “fire” the patients they have now. Others will simply retire.
Many observers assume that physicians would never follow through with such threats. How could they close their doors to the elderly?
The answer is that while Medicare pays some specialists handsomely for some services, the internists and family doctors who practice what many call “cognitive medicine”–listening to and talking to patients—are in short supply precisely because they are not well compensated.
Recent figures reveal that physicians who specialize in internal medicine or family practice can expect to start out earning $120,000 to $135,000 a year, and over time, can hope to average $160,000 to $175,000. For a student who emerges from medical school at age 32 with, say, $150,000 to $200,000 in debt, at a time of life when he or she might want to buy a home or start a family, these are not enticing numbers.
Yet primary care physicians are the doctors that seniors most need to co-ordinate and manage their care. Reformers who believe that every American deserves a “medical home” are right. But who is going to pay the bills to keep the lights on in those medical homes? Primary care physicians are retiring and newly-minted M.D.s are not taking their place. According to MedPac’s most recent June report , 30 percent of Medicare beneficiaries who are looking for a new primary care physician say that they are having difficulty finding one.
As for the doctors themselves, “Physicians are weary,” Dr. Josie K. Williams, president of the Texas Medical Association, explained today in a phone interview.
“They are tired of the games that Congress has been playing. This is the third time in 12 months that legislators have threatened cuts—only to back off at the 11th hour. Congress keeps kicking the can down the road,” Williams added, referring to the fact that when legislators pull back, they don’t repeal the cuts, they just postpone them.
Meanwhile, the cost of maintaining a practice goes up—and Medicare fees don’t. Some doctors have managed to make up the difference on volume, but others are hurting. “For some primary care guys in rural areas, Medicare patients comprise 80 percent to 90 percent of their practice,” Williams explains. In recent years, they’ve seen a 20 percent increase in the cost of practicing—and no cost-of-living adjustments from Medicare."
Across the nation, frustrated doctors have already begun putting up signs. In Topeka, Kan., Dr. Kent E. Palmberg, senior vice president and chief medical officer of the Stormont-Vail HealthCare system, said its 70 primary care doctors were “no longer accepting new Medicare patients as of July 1 because of the draconian cut in Medicare reimbursement.”
Dr. Gerald E. Harmon, a family doctor in Pawleys Island, S.C., said he decided last week that he would not take new Medicare patients “until further notice.”
“This is not what we enjoy doing,” says a notice in his waiting room. “It is what we must do to maintain financial viability.” Dr. Harmon added that Democrats had been more helpful on Medicare legislation, but that the two parties shared responsibility for the impasse.
In Texas, Williams observes, seniors face a serious shortage of doctors willing to take care of them. “Our survey show that the number of doctors taking Medicare is down 20 percent since 2000. If you look at primary care doctors, you find that only 38 percent will take new Medicare patents.”
She recalls a well-known Texas physician who retired recently, and had a very hard time finding a new primary care physician who took Medicare. "Finally, he had to call in a chit,” Williams confides. “ He went to a doctor and said, ‘Look, I took care of your children for all of those years. Now, I need someone to take care of me.’”
In part 2 of this post, I will talk about why both the AARP and military families are supporting the bill that swept the House—and is now awaiting a second vote in the Senate.
I’ll also report on how the bill’s supporters are targeting Republican Senators up for re-election, hoping that they will switch their votes. Who are these Senators? Will they switch?
I’m glad you highlighted the number of Medicare recipients who don’t have a lot of extra income to devote to “skin” in the game.
My assumption is that the numbers of seniors at or just above the low income line is so large that raising fees for better off oldsters would not make much of a dent on the deficit.
you’re spot on when you say that Medicare needs the money. but this legislation does nothing to provide it. it dodges the bullet, once again, on squeezing out the ample waste that you, I and others believe is there and instead simply takes some dollars away from Medicare Advantage and gives them to doctors. That’s a zero sum. At the end, Medicare has no more money than it does now and the basic problem continues even as Congress pats itself on the back for solving the problem. If you’re concerned that docs will walk if reimbursement isn’t high enough, why aren’t you equally worried this will happen if a significant amount of treatment (say a third, for instance) is squeezed out. That would cut physician reimbursement by 33%, triple the amount now being considered. Sorry but I continue to believe that the debate of the moment is a meaningless sideshow with lots of heat and little light that allows us an opportunity to beat up on the Medicare Advantage plans, who fully deserve it, while ducking the really tough stuff.
One characteristic that politicians with integrity have in common is once they give their word on a deal, they keep their word. Senate Majority Leader Reid is not in that class. I’ve met dozens of Congressmen, Senators, Cabinet Secretaries, agency heads and senior White House staff from both parties, along with two Vice Presidents, over the last 20 years at Washington D.C. conferences I attend twice a year. The vast majority is very smart, articulate and dedicated people whether you agree with their point of view or not. Senator Reid appeared at the conference a couple of years ago, and I thought he was among the least impressive of the entire group.
If Congress is serious about solving Medicare’s long term financing problems, it should scrap the sustainable growth rate (SGR) formula, leave Medicare Advantage alone except for forcing insurers who offer private fee for service plans to establish a network by 2011 and end the deeming concept (if you accept Medicare patients, you are deemed to be in our network) and focus on more substantive reform.
By substantive reform, I mean specifically authorizing CMS to take cost into account in deciding what drugs, devices and procedures it will or won’t pay for. It means moving toward bundled pricing for expensive surgical procedures. It includes accelerating the push to implement electronic medical records and reform the medical dispute resolution system. If it did some or all of those things, private insurers would also benefit materially, and perhaps healthcare cost growth could be brought under control.
When I talk with insurance executives about concepts like bundled pricing or not paying for certain expensive new drugs or devices, the answer I get is that whenever they try to be “entrepreneurial,” they create “friction” with providers. In short, it’s more aggravation than it’s worth. The fact is that Medicare drives payment policy in the U.S., and private insurers cannot do anything significantly differently unless and until CMS does it first.
Democrats are all excited about steamrolling Republicans to cut Medicare Advantage so they can save $14 billion over five years to pay for pushing the physician fee problem out for one more year. Over those same five years, Medicare will spend well over $2 trillion dollars. Give me a break! The political hackery frankly makes me sick.
Ginger & Jim–
Thanks for your comments.
Ginger– Yes, too manople assume that seniors are wealthy becuase a small percentage of seniors became very wealthy during the bull market of 1982-1999–particularly if they got into the market in the early 1980s.
If they got in early, they made so much money that they did well even if they didn’t get out in the late 1990s.
But less than half of all Americans owned stock during most of that period.
. And many of the seniors who did buy stock did it in the mid to late 1990s–and then lost more than they invested when the market crashed. (Those who took major losses couldn’t afford to stick around to see if, perhaps, their money would come back.)
And you’re right, the percentage of truly affluent oldsters is small.
Moreover, if we tried to raise their fees in a major way, we would lose what Medicare has going for it: solidarity. Becuase it’s a program that helps everyone, regardless of class, it has enjoyed nearly universal support.
Jim–Thanks for your kind words.
You ask:
” If you’re concerned that docs will walk if reimbursement isn’t high enough, why aren’t you equally worried this will happen if a significant amount of [wasteful] treatment (say a third, for instance) is squeezed out. That would cut physician reimbursement by 33%, triple the amount now being considered.”
Here’s my answer: most of the waste in Medicare spending is big ticket items (roughly 80% of all health care spending is for expensive products and major procedures.)
Most of those bills don’t come from the primary care docs or palliative care sepcialsts that seniors sorely need.
These bills from drug-makers and device-makers selling extraordinarily expensive products, plus speciaists who are doing the bleeding-edge procedures, 3rd rounds of chemo, etc.
Those specialists are less likely to stop seeing Medicare patients becuase, even if Medicare squeezed out some of the waste, their incomes would still be very high.
Even if some did stop taking Medicare, patients would be able to find other specialists. There’s no shortage of docs in most well-paid specialities.
The problem is the shortage of primary care docs who are needed to co-ordiante care for seniors, and provide a medical home (i.e. keep track of the 9 medications they are taking and figure out whether some are counter-indicated.)
If Medicare re-thinks reimbursements in a rational way, it would pay these doctors more, while squeezing out the waste at the top of the physician income ladder.
This is what MedPac is calling for. I’ll be writing more about this.
Speaking of quality of care there is a new poll out. Here’s one report on it (I haven’t been able to find a copy of the original online):
http://www.enewspf.com/index.php?option=com_content&task=view&id=3856&Itemid=2
“Several recent surveys by Harris Interactive®, including the latest Financial Times/Harris Poll, asked an identical question of cross-sections of adults in ten developed countries about their own health care systems. This research finds that the United States has the most unpopular system.”
Update, here’s a link to the Harris site:
http://www.harrisinteractive.com/harris_poll/index.asp?PID=927
Robert–
Very interesting–thanks for the link. I will probably write about it . . .
Good post!
The problem with the sustainable growth factor has been that as these new and very expensive procedures are approved and paid for by Medicare, they have added to the overall costs under Medicare Part B. The sustainble groth factor was supposed to restrain this growth by capping the overall pool of money at the growth of inflation, so if you add alot of very expensive high ticket procedures, which have bolstered the growth in income for specialists, the overall pool of money is progressively distributed to this group doing the most expensive medicine. The result is that cognitive specialties, that have no new procedures to perform, get less of the pie. Constantly repeating the cycle will get you just what we have evolved to, which is a very technology oriented, procedure driven health care system.
Patients constantly complain they cannot reach or talk to their doctor. Is it any wonder this is the case if the system is going to reward physicians more for doing things to patients rather than diagnosing and educating them regarding their health issues and how to solve them.
The SGR must be eliminated to bring some sense of fairness back to medical reimbursement for physician specialties and primary care.
By the way, it is not fair to divide these groups by specialists and primary care. It is better to view it as proceduralists vs cognitive medicine. Case in point is the infectious disease specialist, rheumatologists and endocrinologists which seem to be short in supply as well since they are all specialties that do not have an abundance of well compensated procedures to supplement their cognitive practices.
Keith–
Thanks and good point about how it makes more sense to talk about “proceduralists” who perform procedures and “cognitive care docs” rather than prmary care cos and “specialists.”
Other “specailits” whose incomes are low are pediatricians and palliative care specailists. And. my guess is the gerontologists who care for hte elderly also are not particuarly well-paid.
But when I talk about cognitive care specailists some surgeons object: “Are you suggesting that surgeons don’t think?!”
You’re absolutely right: we have to get rid of the “sustainable rate formula” that decreed these across the board cuts in the first place. We need to address physicians fees with a scalpel, not an axe.
Indeed, a good point about prodecuralists vs. non-proceduralists. One could also argue that pulmonologists don’t get paid enough; they spend long hours in the ICU with the sickest of patients, and their night-call and weekend-call responsibilities are quite burdensome. Reimbursement for their main “procedure”–bronchoscopy–doesn’t really do a heck of a lot for their bottom line. Their response? Become subspecialists in “sleep medicine”–which apparently pays more–and get the hell out of the ICU’s and doing inpatient care.
What about neurologists? Some of them have decided to focus on EMG (electromyography) and nerve conduction tests, and get out of the business of providing neurology consultations for inpatients (a very important service).
Neurologists deciding to focus on EMG and nerve conduction tests and get out of the business of providing neurology consultations for inpatients, a very important service. I often thought about that over the last couple of years.
I commented a couple weeks back that problems can occur when a battle of the ‘turf wars’ begins. Doctors fight when it comes to performing certain very lucrative procedures. When the interventional radiologist performs a procedure, it becomes more expensive than if it were done by the neurologist who has been trained to do it easily.
Why should a patient get a lumbar puncture by an interventional radiologist who may use fluoroscopy, has a whole team of nurses and will likely bill out an extra ordinary facility fee for the use of all that great technology when the neurologist, who learned that skill in their training, can do it quite quickly and comfortably at the bed side?
Although biopsies are the most intrusive method of tumor study, the procedures are able to detect a number of the maligancies missed by conventional methods of detection. Some advocate for other, less invasive methods like MRIs, ultrasounds and Pet Scans. However, if these procedures were to solely replace biopsies, many malignancies could be missed.
The median compensation for diagnostic radiologists is $419,148, according to a survey by the Medical Group Management Association. Wonder how much the neuro doc’s compensation for EMGs and nerve conduction tests?
Another problem with the proceduralist mindset is its interference in getting relevant pre-procedure information to the proceduralist. Especially if the proceduralist is in a specialist group, the proceduralist may not be willing to see the patient before the procedure, and has staff insulating him from any inquiries/information, staff that demand certain information they’ve been told is always relevant, and rejecting other information the patient or sometimes the referring physician may consider relevant.
Under my coverage, I don’t have a gatekeeper, although I usually discuss a proposed test — which I propose — at length. Recently, for example, we agreed that two diagnostic cardiology tests were appropriate. Yes, I got an echocardiogram but never saw anyone but a technician, and had no opportunity to pass along technical information.
In the other case, we wanted a very specific electrophysiological test. No, we weren’t asking to enroll me in the pacemaker clinic, change the device, or anything else until we got the results of a single interrogration (memory dump) of the pacemaker. The electrophysiologist won’t see patients, and his secretary demands complete surgical records of the implantation “in the event he decides to change it.” Telling the secretary that it would be my final decision, not his, to replace anything, I pointed out how the lead insertion surgical notes were irrelevant. No progress.
Eventually, I consulted with a “regular” cardiologist in the group, still invasively trained, who came well recommended and agreed that each of my concerns was reasonable, and he’d write a note to the subspecialists asking them to do what I asked, which my primary care physician also had asked.
Still, it was arguably a needless cognitive consult, if the proceduralists were reachable even in writing. Yes, I know, the average patient is not going to provide chart-level information or make an expert decision on what is appropriate or not.
Still, it’s annoying. When I had my first PTCA, the Great Man would not see me until I was in the cath lab, sending techs and nurses to answer questions. Oh, they also asked my permission to photograph the procedure, not showing my face, for the institution newsletter. I refused, saying that if the invasive cardiologist wouldn’t talk to me, I wouldn’t help with his publicity.
It was a university hospital in the first week of July. I will say the invasive cardiology fellow will probably never ask “how are we today”, as I briefly summarized my condition, then asked for instruments so I could examine him and opine on the other half of “we”. For some reason, I suggested beginning with palpating his prostate.
Gregory,
I agree that turf wars are bad for medicine. What we clearly need is more teamwork–a team approach to caring for the patient…of course with the patient as part of the team! A consensus decision/recommendation can then be arrived at for whatever is being considered. A question for CMS is how exactly does one pay for a team-approach to care? Unfortunately, it seems that the CMS reimbursement scheme based upon the flawed concept of SGR has actually fostered competition rather than encouraged collaboration. Furthermore, the competition between freestanding outpatient centers and full-service hospitals takes us further away from the goal of teamwork. Hospitals need to be considered as key centers in a team-approach; and just like a patient would be well-served by having a “medical home” in a primary care physician, she would also be well-served by having a “hospital home.”
The point about neurologists, etc., is that CARING for the patient is what should be rewarded/incentivized with appropriate compensation. Spending time talking with patients, sorting through various treatment options (or no treatment), evaluating the patient’s preferences/goals/values, and coordinating care with other physicians should be encouraged. Face-to-face time (or at least direct communication) between physician and patient should be central to patient care, rather than a bothersome obligation to be delegated, if possible, to “physician extenders” such as nurse practitioners, physician assistants, or technicians. We want neurologists (for example) to want to see patients at the bedside, instead of having to seek a procedure to perform. We need more endocrinologists, who don’t seem to have an escape outlet in the form of some procedure; thus, they’re just retiring, without having many replacements fresh out of fellowship.
This is the challenge to Medicare and our government.
The Medicare Modernization Act (MMA) of 2003 changed how the CMS paid for medical oncologists’ services. It called for rewarding medical oncologists to communicate with patients and to spend more time dealing with patients’ chronic health conditions caused by infusional therapy.
Medical oncologists would be reimbursed for providing evaluation and management services, making referrals for diagnostic testing, radiation therapy, surgery and other procedures as necessary, and offer any other support needed to reduce patient morbidity and extend patient survival. In other words, being paid to think rather than just dispense drugs.
Before, medical oncologists received no reimbursement for providing oral-dose therapy to patients. This had been the principal barrier to the availability of oral-dose protocol. The advent of oral agents ultimately meant that medical oncology had to change its identity, prior to the Chemotherapy Concession.
The MMA bill offered patients benefits they did not have before, mainly coverage for oral chemotherapy drugs. More might have been achieved if the American Society of Clinical Oncology (ASCO) and other fraternal groups had lobbied as much for the oral chemotherapy drug issue as they did for office-practice expense reimbursement. They fought long and hard to retain the Chemotherapy Concession.
The MMA bill tried to remove the profit incentive from the choice of cancer treatments, which were financial incentives for infusion-therapy over oral-therapy or non-chemotherapy, and financial incentives for choosing some drugs over others. Patients should receive what is best for them and not what is best for their oncologists.
While the MMA bill was trying to pay medical oncologists for being doctors again, instead of being in the retail pharmacy business, the private payors still go along with the Chemotherapy Concession.