Physicians might confront Medicare payment problems

Physicians may be subject to months of disruption in their Medicare payments if Congress and the White House do not come to an agreement in the coming weeks on how to prevent a 10.6 percent cut that takes effect July 1.

With the deadline fast approaching and all but sure to slip, a retroactive fix might be all physicians can hope for.

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“This will be a real disaster for physicians and their practices,” said Cecil Wilson, a physician from Winter Park, Fla., and member of the American Medical Association’s board of trustees.

Patients, too, could be forced to endure confusion about how much they owe their doctors for the medical care they receive.

Most of the legislative activity to address the payment cut, the result of a statutory formula widely viewed as faulty, is taking place among members of the Senate Finance Committee. Over the past week, Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) unveiled competing proposals — each would supplant the scheduled cut with a modest pay increase.

Though lawmakers and aides are working feverishly to complete a bill that can pass the upper chamber, little chance remains they will succeed before the deadline. With the August recess not far off, a busy legislative calendar, and the distractions of the election season, the Medicare bill faces a rocky path.

Moreover, the Centers for Medicare and Medicaid Services (CMS) has cautioned congressional aides that the agency needs two to three weeks to implement new pay rates. The agency has earned considerable experience dealing with changes to physician fees. The statutory formula started calling for cuts in 2002, prompting Congress to put in place a series of short-term remedies.

Physicians want Congress to make the fix before July 1. If not, they would angle for a retroactive remedy. Even then, physicians would have to accept fees that are 10.6 percent less than they are paid now, until new legislation takes effect.

While this would eventually provide physicians with larger fees, they would have to wait an undetermined amount of time to receive their full payments, which could put a crimp into their practices’ cash flows.

If Congress enacts a retroactive fix, it would present a twin challenge to CMS and its billing contractors: They would have to set up a new fee system for future claims and reprocess old claims already paid under the lower rates.

“The reprocessing is disruptive for all parties involved,” said Tom Gustafson, a senior health policy adviser at Arent Fox and former director of CMS’s Center for Medicare Management.

The shorter the time between the implementation of a cut and the enactment of a fix, the less drastic the disruption, Gustafson said. Because Medicare handles about 1.2 billion claims a year for medical services, “A month ends up being a lot of claims,” so if Congress does not act before the August recess, “It’s just a big mess” for CMS, physicians and patients, he said.

Beneficiaries are required to pay 20 percent of their doctor bill when they are treated; there also is a $135 annual deductible. If Congress were to retroactively increase payment rates after July 1, beneficiaries technically would owe additional money for their previous doctor visits.

The physician would be responsible for recouping that money, according to CMS. “How you do explain to beneficiaries, ‘Oh, by the way, you owe us another buck?’ ” Gustafson said.

About 80 percent of Medicare beneficiaries have some form of supplemental insurance that covers all or part of their coinsurance, whether through private Medigap plans, employer-sponsored plans or Medicaid. Just as CMS would have to go through the complex process of revisiting old claims, so would these secondary payers.

“This just illustrates the complexity of this,” Wilson said.

The uncertainty about the income already is having an adverse effect on physicians’ practices.

According to survey results issued in March by the Medical Group Management Association, nearly a quarter of physicians have limited or have considered limiting the number of Medicare patients they treat.

“It’s difficult to plan any increase in expenditures,” Wilson said.

Twice before, Congress failed to prevent a cut to Medicare fees before a deadline, in 2003 and 2006.
Lawmakers left Washington at the end of 2005 without agreeing to a deal to stop a 5 percent cut for 2006. For the first six weeks, physicians were paid at the lower rate. After Congress acted in mid-February of that year to establish a 0.5 percent increase, CMS had to simultaneously implement the new fee system and revisit claims already paid at the lower rate in order to make full payments based on the new legislation.

In some cases, doctors waited up to six months to have their payments rectified, though many of their problems were solved more quickly, according to a CMS official.

“During that period of time, physicians were having to juggle priorities” and sometimes take out loans to keep their practices afloat, Wilson said. Few physicians complained as the process unfolded, according to CMS.

In 2003, a 4.4 percent cut took effect on Jan. 1. Congress authorized CMS to replace the cut with a 1.6 percent increase from March onward but did not make the change retroactive.

This year, CMS, the physicians and their patients could have longer to wait. The cut is taking hold on July 1 because Congress was only able to get a six-month fix passed in 2007.