Rural doctors seek equal Medicare pay

Others worry that the geographic disparity issue will take the focus away from an update fix.

By Markian Hawryluk, amednews staff. July 22, 2002.

Chicago -- At the American Medical Association's recent Annual Meeting in Chicago, few issues were as divisive as the geographic disparity of Medicare payments to physicians.

It's not that physicians in urban areas couldn't sympathize with their rural counterparts. Many were just concerned that a fight for less variation in payments from region to region would distract lawmakers and public officials from the deep cuts in Medicare payments affecting all physicians.

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Rural delegates ultimately persevered, and the House of Delegates voted to push for legislation that would reduce geographic disparity.

Less a month after the debate, Congress may be poised to address both issues. Medicare legislation passed by the House in early July included an update fix and provisions that would partially address the geographic variation in payments. The Senate is expected to take up a Medicare bill in July, but Senate leaders have been tight-lipped about their plans for physician payments.

A solution to the geographic difference problem could not come soon enough for a coalition of 15 rural state medical societies that pushed for the AMA to resolve the situation. For rural physicians, it's an issue of fairness for both themselves and their beneficiaries.

"My patients pay the same Medicare payroll taxes as people in other states, they suffer the same illnesses, get the same treatment from the same types of health providers, yet Minnesota Medicare beneficiaries received on the average $4,800 of Medicare benefits in 2000," said Anthony Jaspers, MD, a family physician from Lake Crystal, Minn. "That's 13% below the national average of $5,500." That means taxes paid by Minnesotans are being used to pay for Medicare beneficiaries in other states, he said. "Medicare is a national program and should treat all seniors equally."

Medicare payment differentials make it harder to recruit physicians to rural areas.

However, much of the pay differential per beneficiary is due to higher utilization rates in urban areas. People in rural communities tend to seek treatment less often and rely less on higher-cost specialists.

Nevertheless, there are differences in physician payments from state to state. Rural physicians complain they are having trouble recruiting doctors to their areas because of the lower rates.

"Potential recruits call and ask what the Medicare reimbursement is in Iowa and never return your calls," said Bruce Trimble, MD, a rheumatologist from Mason City, Iowa. "They don't return calls because they know these differences in reimbursement represent more than differences in the cost of living or the cost of doing business." He said rural clinics have closed and access to specialists is dropping because of the geographic disparities.

Source of the complaint

Rural physicians' problem is rooted in the Medicare reimbursement formula.

Payments to physicians under the Medicare fee schedule are determined according to relative value units. These RVUs are intended to reflect the amount of physician work, practice expenses and liability insurance costs for a given service. Each of these three RVUs are then adjusted by geographic practice cost indices aimed at accounting for regional differences in costs, such as wages, office rent and liability premiums.

After adjustment, the three RVUs are added together and multiplied by the national conversion factor to determine local payment rates. Combined, the three adjustments can lead to substantial changes in payment per procedure. In 2002, for example, Medicare payment for a total knee replacement averaged about $1,514. A Manhattan physician would receive about $1,880 for that procedure, while an Arkansas surgeon would receive about $1,310.

Medicare pays $1,880 for total knee replacement in Manhattan; in Arkansas, $1,310.

The bill passed by the House would take a small step toward fixing the geographic variation by establishing a floor for the physician work adjuster in 2004. The change would increase payments in 36 Medicare localities without reducing payments for others. The provision would be effective only if the secretary of Health and Human Services determined there was "a sound economic rationale for the implementation of the change."

Meanwhile, the AMA vote at the Annual Meeting calls on the Association to push for legislation that would reduce unfair geographic disparities, despite many delegates' concern it could muddy the waters for an update fix this year. Eliminating the cuts in the physician update would benefit all physicians and would help rural physicians more than a geographic variation fix, AMA President Yank D. Coble Jr., MD, said.

The House-passed geographic disparity provision would add only $150 million in spending for physician services in 2004. By contrast, the update fix passed by the House would cost about $4.4 billion that same year.

"We do view the concerns about geographic equity as a very important issue, and we think Congress should address this in the current Medicare package," Dr. Coble said. "But not at the expense of fixing the update problem."

A house divided

There is also concern that the geographic disparity issue could polarize the physician community -- pitting urban doctors against rural ones. The same debate has been played out many times on the state level with differing results.

The Centers for Medicare & Medicaid Services has in the past accommodated states that wanted to shift from differing urban and rural rates to a single payment rate. But the agency has wanted assurances that the physician community was united behind the proposal.

Susan Eilts, MD, an internist from Omaha, Neb., said the coalition of rural states is asking physicians nationwide to do no more than what they've been willing to do on a state level.

Rural doctors benefit more from easing update cuts than from geographic fixes.

"Oklahoma, Nebraska and Iowa have ... had the disparity amongst the areas within our own states removed," Dr. Eilts said. "This indeed could be divisive, but simply on the point of fairness, our states have done this."

Other states were not as successful. Mike Ellis, MD, an otolaryngologist from Chalmette, La., described how Louisiana tried to switch to a single geographic payment region about 15 years ago but couldn't get all physician factions on board. Louisiana still has separate rates for New Orleans and the rest of the state.

"It was incredibly divisive. We have lost lots of members and have people who would not consider joining the state medical society," Dr. Ellis said. "Medicare has created a brilliant plan for pitting us against each other and against other providers."

Other states, such as Ohio, have moved to a single rate, but saw large numbers of urban physicians leave the state medical society as a result.

ADDITIONAL INFORMATION:

Medicare pay raise

No locality would lose money under the House provision to adjust geographic disparity in physician work expense, but some areas would gain more. Had the provision been in place in 2001, these localities would have received the most additional Medicare funding.*

Puerto Rico: $36,191,244
Texas (non-urban areas): $18,946,385
Florida (non-urban areas): $13,401,784
North Carolina: $12,485,307
Missouri (non-urban areas): $10,551,200
Arkansas: $9,403,903
Iowa: $9, 347,824
Mississippi: $8,156,494
Illinois (non-urban areas): $7,605,496
Tennessee: $6,730,099