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Physician pay under Medicare returns a poor diagnosis

On June 17, 2010 payment for physician services under Medicare fell 21%. A week later Congress gave Medicare physicians a pay raise of 2.2% and reversed the 21% reduction for 6 months.

Now, unless Congress addresses the issue in the upcoming "lame duck" session prior to December 1, the original cuts and additional planned payment reductions could reduce physician payments 29.1% by January 2011-with even more cuts bringing the total to 32% in 2011.

Like any business person, physicians can and will choose to opt out of the Medicare system when payments become too low to support their business goals. For now, congress has managed to side-step or offset decreases with “a long series of short-term . . . patches, three in 2010 alone.” [i]

How could this happen?

Since 1990 . . . the sustainable growth rate (SGR) provision of the Balanced Budget Act of 1997, which replaced the Medicare Volume Performance Standard (MVPS) has been used by the CMS to control costs by tying physician reimbursements under Medicare to gross domestic product (GDP).

Each year for the past decade, physicians have faced steep payment cuts that make it harder and harder for them to care for their Medicare patients. . . . Please fix Medicare by developing a rational Medicare physician payment system . . . In all but two years since 1990, this actually resulted in a net increase (not counting inflation) in physician payments, though this growth is significantly lower than growth in reimbursements for other services over the same period.

The conversion factor. Changes in the way the SGR is calculated and other legislation that requires computing the conversion factor as if the previous increases had never applied began taking effect in 2010. That in combination with a weak economy and GDP (and a volatile political environment) have converged to create a kind of perfect storm of circumstance that has resulted in the current serious situation for providers and recipients of Medicare services.

What can I do about it?

Talk to your representatives in Congress. If you’re already politically savvy, get on the phone and call your local and state representatives. Here’s a link to a complete list of state and federal legislators—with the elections and many other unresolved issues, legislators have a lot on their plate for the upcoming legislative session. Congress needs help understanding that another stop-gap measure could be disastrous for the elderly and many older Baby Boomers who are just entering the Medicare system. Then, for both the savvy and the less motivated . . .
Get behind a plan to “Stop the Medicare Meltdown.” “America’s Medical Societies” including the AMA, many state medical associations, practice associations and academies are urging doctors and others to sign and support a joint petition (follow the link to sign and forward the petition to other voters). The non-partisan petition strongly urges Congress to get past repeatedly playing politics, blaming the other party, then “fixing” the problem with “short-term patches” and to move toward legislation that will result in a permanent solution.
Stay in the game. The AMA has published an extensive Medicare resource and action guide to help physicians get involved in reform and talk to politicians about the importance of passing legislation that mandates a “payment system that automatically keeps up with the cost of running a practice.”

Congress must repair the broken payment system before the damage is done and cannot be reversed.

For more information and guidance on this and other issues that affect your bottom line, contact . . .

PBN Business Development, 800.288.4901,

[i] March 3 , Congress delayed the enforcement of the conversion factor until April 1, 2010.

April 15 ,Congress delayed the implementation again and extended the 2009 rate to June 1, 2010.

June 25 , Congress delayed implementation of the conversion factor until December 1, 2010 and increased reimbursements by 2.2%. The 2.2% increase is retroactive to June 1, 2010, and will expire on November 30, 2010.

December 1, barring any further congressional legislation, this will result in a 23.5% decrease in Medicare reimbursements. (Footnote Source: Wikipedia)

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Special Issue: Let's Do Something about SGR Payment Reductions Now!