MedPAC recently released a proposal for fixing the annual exercise that Congress conducts where it threatens to cut Medicare physician fees by 25%, then increases them by 1%. The Medicare Payment Advisory Commission (MedPAC) is an independent congressional commission that provides advice to Congress about Medicare issues.
The Sustainable Growth Rate formula (SGR) was created in 1997 to keep annual Medicare cost increases in line with U.S. gross domestic product levels. This formula is flawed such that every year results in a decrease in provider fees (physicians, psychologists, social workers, nurse practitioners, etc.), despite the inflation rate increasing. And every year, the Congress says it must reduce the fees for the following year, resulting in an outcry from providers to block the decrease and fix the SGR permanently. But Congress makes a short-term fix and passes the buck for another year.
In 2012, the SGR cut is scheduled to be 30%. Taking a stab at fixing the SGR formula, MedPAC described a proposal that would keep fees for primary care providers flat for 10 years, and reduce specialist fees for 5.9% per year over the next 3 years, then keeping specialist fees flat for the following 7 years.
The specialist cuts amount to nearly 18% over 3 years. We are already having trouble finding psychiatrists to accept Medicare patients because of the current level of fees. An 18% cut would result in many more psychiatrists and other mental health providers dropping out of Medicare just when the aging Baby Boomer generation will be needing us most. This cut will force these older people to either pay out of pocket for psychiatric care or wait months for a new appointment with one of the providers still accepting Medicare.
MedPAC explained that providers can make up the difference by just seeing more patients. This belies the fact that a psychiatrist’s services are primarily time-based, so we can not just squeeze more patients into an 8-hour day. Additionally, to the extent that physicians’ overhead and malpractice costs will continue to escalate over 10 years, having an 18% cut followed by 7 years of no increases amounts to an additional 21% cut given a 3% annual inflation. A 39% cut over 10 years would result in large-scale abandonment of Medicare by many physicians and other specialty providers.
I think Medicare needs to reinvent its game by moving away from per-visit payments -- which reward volumes -- toward payments based on severity-adjusted episodes of care combined with quality and outcomes multipliers -- which rewards quality and efficiency.
By re-inventing the way Medicare pays all providers, not by quantity but by quality and efficiency, it has a chance to bend the cost curve without making it harder for beneficiaries to find a doctor who will accept Medicare. Medicare enrollees deserve to be treated better. If Congress messes this up, there will be hell to pay at the ballot box.
Steven Roy Daviss, M.D., DFAPA, co-author of Shrink Rap: Three Psychiatrists Explain Their Work, is chair of the department of psychiatry at the University of Maryland Baltimore Washington Medical Center.