Physicians face cut in Medicare reimbursements

By Barbara Pash

Stethoscope and dollarsIn what the American Medical Association calls an “annual crisis,” physicians are once again facing a cut in Medicare reimbursements – almost 30% in 2012 – unless the U.S. Congress acts by January 1. This year, though, there appears to be an added layer of uncertainty because of the supercommittee, whose decisions are due this week.

“I wouldn’t call it panic but there is more urgency this year than usual, an elevated level of concern,” said Michael Lachance, referring to the U.S. Congress Joint Select Committee on Deficit Reduction, which is tasked with cutting $1.2 trillion from the national budget.

“Medicare accounts for 30 percent of total health care spending, and that could be a major trigger,” continued Lachance, legislative liaison for the state Department of Aging. “No one knows what will come out of the supercommittee.”

Joseph Gribbin expressed a similar opinion. “What is the tipping point? What will it take to actually reduce health care costs?” Gribbin, professor and graduate program director of the Erickson School of Aging, Management and Policy at the University of Maryland Baltimore County, said of the supercommittee.

Doctor reimbursement is a perennial problem

But Paul Van de Water, for one, doesn’t see it that way. “It’s a problem every year and this year is not appreciably different,” said Van de Water, a senior fellow art the Center on Budget and Policy Priorities, a Washington, D.C. nonprofit that works on fiscal policy at the federal and state levels.

Last year, he pointed out, with physicians facing a nearly 30% cut in Medicare reimbursements, Congress waited until mid-December to block the cut. “The fix went down to the wire,” said Van de Water.

The issue predates President Obama’s 2010 Affordable Care Act. In the 1997 balanced budget act, the Sustainable Growth Rate (SGR) was created for Medicare. Every year since then, following the SGR formula reimbursements are automatically scheduled to be cut unless Congress intervenes. In only one year, fiscal 2002, has Congress not acted.

Lachance said that the Medicare reimbursement provision was not addressed in the Obama health care reform because its goal, like the reform itself, is to save money, not spend it. “The provision was already part of the law,” he said. “We were told $96 billion would be saved in Medicare spending over a 10-year period by allowing that provision to take effect.”

For 2012, physicians across the country will have a 27% percent cut in Medicare reimbursements unless Congress intervenes. In Maryland, according to the American Medical Association (AMA), the result would be a reduction of $420 million in health care for Medicare patients, and would reduce practice revenue an average $35,000 per Maryland physician.

Doctors would drop patients

Several groups besides the AMA are opposing the reimbursement reduction. In fact, Lachance said he is not aware of any group that is actually in favor of the reduction.

“Anyone who knows Medicare knows that if that cut goes into effect, access for Medicare patients will be seriously restricted. Many of the doctors won’t accept” such patients, he said.

The AMA statement is nothing if not blunt on the subject. The cut will “worsen access problems and make it extremely difficult to pay for office space and other expenses and avoid staff layoffs,” it stated.

Gribbin, a former associate commissioner for the Social Security Administration, knows one surgeon who has closed his practice and now works for a hospital, and a second surgeon who is considering doing the same.

“Doctors call it ‘back door rationing’ because hospital salaries and bonuses can be maximized before the end of a year,” he said. “The implications are huge not just for physicians but for the beneficiary community, and they’re not well understood.”

Greg Crist, vice president public affairs for the American Health Care Association, a non-profit federation of state organizations in the skilled nursing sector, raised patient access and staff cuts in that sector as well.

“Our concern is any effort to fully fund the ‘doc fix’ could result in additional cuts to nursing homes and post acute care facilities – centers that work hand-in-hand with hospitals to care for the elderly patients who can’t immediately go home from a hospital,” he said in a statement.

Proposals to solve reimbursement issue

Various ideas are being floated to solve the annual Medicare reimbursement issue. The AMA is recommending that reimbursement payment remains at a stable level for five years while the SGR is eliminated and other proposals are tested. For example, the Medicare Payment Advisory Commission (MedPAC), an independent congressional agency, called for repeal of SGR and a gradual reduction in physician payout rates.

But the current options have been estimated to cost between $200 to $350 billion over 10 years, said Van de Water, and the longer Congress waits to act, the more difficult and expensive a solution becomes.

“It’s hard for Congress to agree to that much money and make cuts elsewhere in Medicare to offset costs,” he said. “Congress has been doing it one year at a time. It’s not great but it gets the job done.”

Another aspect of the health care situation is Medicare Part B premiums, which were announced earlier this fall.  The standard monthly Medicare Part B premium will be $99.90 for 2012, a $3.50 increase for most people, to a projected $110.50 in 2013 and $115.80 in 2014. Higher-income beneficiaries (minimum $85,000 annual income per individual; $107,000 per couple) will pay $139.90 to $319.70 per month in 2012, based on a sliding scale.

In a statement, AARP applauded the lower-than-expected increase in 2012 Part B premiums. Lynn Nonnemaker, senior strategic policy advisor for the Public Policy Institute of AARP, in Washington, D.C., said of Part B premiums and physician reimbursement:

“Premiums are set based on expectations for Part B spending each year and the number of enrollees. CMS [Centers for Medicare and Medicaid Services] is projecting how much Medicare will spend for Part B in 2012. They assume payment rates will not fall by 30 percent because Congress will act.”

About The Author

Len Lazarick

Len Lazarick was the founding editor and publisher of and is currently the president of its nonprofit corporation and chairman of its board He was formerly the State House bureau chief of the daily Baltimore Examiner from its start in April 2006 to its demise in February 2009. He was a copy editor on the national desk of the Washington Post for eight years before that, and has spent decades covering Maryland politics and government.

1 Comment

  1. Healersam

    It is time to forget about Medicare.

    Sam Sanchez, D.O.


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