Medicare Payments Stay Flat

January 12, 2007
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GRAND RAPIDS — The world is flat for West Michigan doctors relying on Medicare reimbursements.

Congress kept 2007 Medicare payment rates essentially level with those of 2005 and 2006. That leaves physicians who see a lot of Medicare patients wondering if they can afford to serve the population age 65 and older.

"Every year, the federal government is putting more and more pressure on us," said Dr. Paul Farr, president of the Michigan State Medical Society and a Grand Rapids gastroenterologist. "When it (Medicare rate) is flat for many years, people say they can't afford to take this insurance that pays below the market rate. It really begins to impact access for our senior citizens."

A formula passed by Congress in 1997 would have demanded a 5.1 percent cut in this year's rates, but at the 11th hour, the lame-duck Congress of 2006 blocked it. More than $6 billion originally earmarked for rural health care will be shifted to cover the price tag.

The 1997 plan was supposed to play a part in stemming health care costs, but a 4.8 percent drop in payment levels in 2002 prompted an outcry. In subsequent years, Congress offered below-inflation-rate increases, followed by freezes. The 1997 plan would be expected to trigger Medicare payment cuts through 2012 — as much as 10 percent in 2008, according to the Congressional Budget Office. But Congress has been blocking the cuts each year.

Inflation ran at 2.7 percent in 2004, 3.4 percent in 2005 and an estimated 3.3 percent for 2006, according to the Federal Reserve Bank. As Medicare payments lose ground, insurance premiums are forced to go up to cover the shortfall, Farr said.

"It's sort of like my telling GM I want Cadillacs for each of my people, but I'm only going to pay $8,000 for each Cadillac. Who pays for the shortfall?" Farr added. "Business would end up paying a larger percentage share than it really should. I think it's a strong business issue."

Of the more than 200 doctors at Michigan Medical PC, few are accepting new Medicare patients, said Dan Grevengoed, vice president of reimbursement, although most try to accommodate existing patients who cross their 65th birthdays. Internal medicine doctors see the most Medicare patients, he said, but patients' access to them has become limited.

"Outside of Medicaid, Medicare is our lowest payer by far," Grevengoed said. "Medicare, in many cases, does not even cover cost of the service. They can't afford to take on too many of those patients and hope that the commercial population will cover the difference."

Doctors are reluctant to accept new Medicare patients, knowing that cuts are on the horizon, he said. At least 60 percent of internal medicine doctors in the region are approaching retirement age themselves and are planning to retire within the next 10 years. And the prospect of dealing with Medicare is steering many new doctors to other types of practices.

"Medicare is projecting a 25 to 30 percent cut over the next five years," Grevengoed said. "Practices can't stay alive that way."

Congress included a provision to boost Medicare reimbursements by 1.5 percent for doctors who participate in a system that measures their quality of care. But many doctors' offices would need to devote a staff person and buy new computer hardware and software to comply, and that cost could exceed the extra payment, Farr said.

"We do not have the technology to be able to report the data they are looking for on quality," Grevengoed added. "They are starting to ask for clinical data — what is the blood pressure, what is the lab test level of these patients? Most physicians' offices have no way to report it. In fact, it's all manual, on a handwritten chart."    

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