This column was originally published in AMA eVoice on May 1, 2008. Dr. Davis is president of the American Medical Association.
If you’re looking for a snapshot of the problems with Medicare’s physician payment system, you need go no further than this chart (PDF, 104KB). It shows that even though the costs of caring for seniors is consistently rising, Medicare still pays physicians at about the same rate as in 2001.
To be precise, the Medicare conversion factor is half a percentage point less than what it was seven years ago. This ever-growing difference between payments and costs is causing physician practices to suffer from rapidly eroding margins that are threatening their viability, putting health information technology purchases out of reach, and leading a significant number of practicing physicians age 55 and older to strongly consider retirement.
To make matters worse, two months from today Medicare is scheduled to slash physician payments by 10.6 percent—and about 40 percent over the next nine years.
There’s no way physicians can absorb these drastic cuts while continuing “business as usual.” According to a recent AMA survey (PDF, 119KB), 60 percent of responding physicians said they would have to limit the number of new Medicare patients they treat if payments are cut this year. Additionally, more than half of the surveyed physicians said they could not meet their current payroll and that a 10 percent cut in Medicare payments would force them to reduce their staff.
That’s why passage of the Save Medicare Act of 2008 (PDF, 73KB) (S. 2785) is so critical. Introduced in March by U.S. Sen. Debbie Stabenow, D-Mich., S. 2785 would prevent a 10.6 percent cut in Medicare physician payments planned for July 1, retain current levels for the remainder of this year, and enact a 1.8 percent increase for 2009. It also would continue rural extender provisions that are set to expire, such as the floor for Work Geographic Practice Cost Indices and the bonus for physician scarcity areas.
Another aspect of Medicare payment also needs attention from Congress: balance billing, which provides physicians with a means to bridge the gap between such inadequate Medicare payment levels and the actual increases in practice costs.
Balance billing occurs when physicians opt to bill patients for a portion of what Medicare does not cover for medical service. Physicians who choose to not participate in Medicare are paid rates that are slightly less than participating (PAR) physicians, and balance billing is a way for nonparticipating physicians to make up the difference.
Under current law, nonparticipating physicians may make assignment decisions on a case-by-case basis and are allowed to bill patients up to 115 percent above the Medicare-approved amount for a service. This may be confusing because the Medicare-approved amount is 5 percent lower for nonparticipating physicians. The 115 percent limiting charge applies to the Medicare-approved amount for nonparticipating physicians and is thus only 9.25 percent above the PAR-approved amount for the service.
Physicians who signed a one-year PAR agreement are obligated to accept assignment for all Medicare patients and cannot balance bill until they change their status to nonparticipating physicians at the next enrollment opportunity.
The AMA has strong policy on balance billing that was approved in November during the 2007 Interim Meeting of the AMA House of Delegates.
The policy directs the AMA to work to introduce legislation that would allow Medicare balance billing and end budget-neutral restrictions that are inherent in the Medicare physician payment structure. It calls for that legislation to trump state laws that prohibit balance billing and to forbid the inappropriate inclusion in physician-insurer contracts of provisions that ban balance billing. The policy also instructs the AMA to develop model language for physicians to use in insurance contracts that try to restrict balance billing of any insured patient.
Legislation in the U.S. House of Representatives, H.R. 4736 (PDF, 72KB), supports the AMA’s stance on balance billing and would help preserve seniors’ access to care by allowing more physicians to continue to treat Medicare patients. Sponsored by U.S. Rep. Tom Feeney, R-Fla., this legislation would remove the 115 percent limiting charge for nonparticipating physicians and would pre-empt state laws that prohibit physicians from balance billing patients in certain contexts.
The AMA has initiated a co-sponsorship campaign to increase support for H.R. 4736. I urge you to send an e-mail asking your representative to support balance billing and to co-sponsor this legislation.
Please send comments, questions, and replies to amaprez@ama-assn.org.
Content provided by: Dr. Robert M. Davis, M.D.