Guest post: Medicare cuts in 2010? Maybe yes, maybe no

By Brad Dodge on May 7th, 2009

Woodcock and Associates is a leading consulting organization working in the medical practice operations and revenue cycle management areas. Today Elizabeth W. Woodcock, MBA, FACMPE, CPC, writes on the potential of Medicare cuts in 2010.

With payments to physicians treating Medicare beneficiaries scheduled to plunge by 20.6 percent starting January 1, 2010, and a depressed U.S. economy, you wouldn’t think there could be any good news ahead for physicians. But the Obama administration has offered a ray of hope – and it could turn into a bright beam of light for physicians. Or not.

There are few specifics so far, but in testimony before the House Budget Committee recently Dr. Peter Orzag, head of the White House’s Office of Management and Budget, hinted that the administration may toss out Medicare’s flawed sustainable growth rate (SGR) formula. Orzag added: “We recognize that we need to move toward a system in which doctors face stronger incentives for providing high-quality care rather than simply more care.”

The SGR helps determine annual fee updates to doctors, but its flawed approach – subtracting per capita GDP from spending on physician services – has produced automatic across-the-board cuts for several years running. Congress always reverses the cuts at the last minute, but next January’s scheduled 20.6 percent cut – the biggest yet – might be too costly to overcome.

Tossing out the formula would be welcome news because private insurers tend to mirror Medicare’s movements. Physicians’ bottom lines are further eroded by consumer-directed health care products – a fancy name for putting more financial responsibility on patients. Unfortunately, patients are a physician’s worst payer. Many patients either can’t or won’t pay larger shares of their health care costs. As the ranks of the uninsured grow, the problem grows worse, bringing even larger write offs.

So far, there are more questions than answers: Will Obama actually eliminate the SGR and boost Medicare payments? If so, what will the new fee schedule look like? Will it be another complicated mess like the initial years of the government’s pay-for-performance program, the Physician Quality Reporting Initiative (PQRI)? Will the economy turn around next year and bring patients the money they need to adequately fund health savings accounts and pay their health care bills? Will insurance coverage be expanded to cover the uninsured – and if it is, will the reimbursement be enough for physicians to sustain their busy, but increasingly unprofitable practices?

The biggest question of all is: How much longer will the current system of private-based health care survive amidst the many downward pressures on physician income? Sure, we’ll always have doctors, but will there be enough of them and who will they work for? As the old radio shows used to say, ‘Stay tuned, folks!’

Atlanta-based Elizabeth Woodcock speaks and writes about the medical practice industry. Book her for a speaking event, or purchase one of her programs on DVD here.