American College of Physicians: Internal Medicine — Doctors for Adults ®


News about Medicare: a good-news, bad-news scenario

Legislation streamlining the program could reduce physician hassles, but a pay cut may be on the horizon

From the December ACP-ASIM Observer, copyright 2001 by the American College of Physicians-American Society of Internal Medicine.

By Robert B. Doherty

Internists have long viewed Medicare with mixed emotions. As the specialty that cares for more Medicare patients than anyone else, internists know that the program provides affordable coverage to all eligible elderly and disabled patients who otherwise might go without health insurance coverage.

But internists also experience the bad aspects of Medicare: excessive documentation requirements, complex rules and fees that have not kept up with the costs of care. Some have seen a side of Medicare that is downright ugly: government-hired auditors who demand repayment of tens of thousands of dollars in alleged overpayments, all based on a flawed statistical sample of records.

The good news is that Washington is heeding internists' concerns about the hassles involved in caring for Medicare patients. The bad news is that Medicare fees may be cut by 5.4% on Jan. 1, due to flaws in the formula used to calculate Medicare fee schedule updates.

Regulatory relief

First, the good news: Two key House of Representatives committees have recommended favorable action on Medicare regulatory relief bills that ACP-ASIM supported.

The pending legislation would require Medicare carriers to provide accurate information to physicians. Employees of carriers could no longer give physicians bad advice about how to bill or code for a particular procedure and then later demand a refund because that advice was later found to be incorrect. In other words, carriers would have to stand by their advice and not reverse themselves at audit time. Carriers would be have to spend more money educating physicians about proper billing and coding instead of focusing resources on finding mistakes after physicians submit bills.

The bills would also give physicians more due process rights when they become encumbered in a Medicare audit. Physicians appealing an audit, for example, would have more time before they had to begin repaying alleged overpayments.

The proposed legislation would also limit carriers' use of statistical extrapolation to demand huge refunds. Some carriers currently estimate alleged overpayments by reviewing as few as 30 medical records.

Medicare would be required to pilot test a variety of alternatives to the current onerous guidelines for documenting evaluation and management (E/M) services. One option would be to peer review physicians who demonstrate "outlier" billing patterns instead of having all physicians provide detailed documentation of everything they do in an office visit, as is currently required. Another option would test a method that requires physicians to document only encounter time and the key elements of the visit in the medical record.

The encounter-time alternative was added to both bills in direct response to an ACP-ASIM proposal, which we presented at a Sept. 26 hearing of the Subcommittee on Health of the House Ways and Means Committee. ACP-ASIM was the only group representing physicians and other health care "providers" that was invited to testify at the hearing.

Previously, the College had worked with key members of Congress, the AMA and other health care professional groups to draft the original provisions of the Medicare Regulation and Regulatory Fairness Act (MERFA). A majority of House of Representatives members cosponsored MERFA, and it served as the impetus for the bills that the House Commerce and Ways and Means committees later approved.

Although final action on the bills had not yet taken place at press time, Congress appeared to have strong bipartisan desire to vote on Medicare regulatory relief— and send it to the President for his signature—before adjourning for the year.

Fee schedule cut

Unfortunately, news about the Medicare fee schedule update was far more negative. On Nov. 1, the Center for Medicare and Medicaid Services (CMS)—the agency formerly known as HCFA—announced that next year's Medicare fee schedule update would be minus 5.4%.

This means that the payment for services rendered to Medicare patients under the fee-for-service program will drop by 5.4% on average. Payments for individual services might be cut more or less, depending on other specific changes in Medicare payment policies.

Why did this happen? The annual Medicare fee-for-service update is determined using a flawed formula called the sustainable growth rate (SGR). The SGR sets a limit on how much Medicare can spend on physician services. If physician expenses exceed the allowed growth rate in one year, payments are reduced the following year. If spending is lower than the growth rate, payments are increased the following year.

The problem is that the SGR is linked to how well the economy is doing, which is measured by changes in per capita gross domestic product. When the economy does well, the update does well. When the economy is in recession—as most economists say it is today—physicians are penalized.

Does it make sense to penalize—or reward—physicians for something they have no control over: the state of the U.S. economy? Of course not, which is what ACP-ASIM has been telling Congress since it enacted the SGR in 1997.

Every year, we have argued to change the formula. Because the economy has done so well the past few years, the Medicare fee schedule updates also did pretty well. As a result, Congress saw little impetus to change things.

The College warned that sooner or later, the SGR would trigger deep cuts in physician payments as the economy cooled off. Now, the scenario we foresaw is about to happen.

ACP-ASIM is working with the AMA and other specialties in a concerted lobbying effort to get Congress to block or postpone the Jan. 1 update until a permanent replacement for the flawed SGR is enacted. With the clock running down on the congressional session, it is unclear whether Congress will find time to take the necessary actions to prevent the 5.4% cut.

For internists, the Medicare experience will continue to be a mixed one. On one hand, pending legislative relief from excessive hassles will be welcome. But internists will rightly respond with anger if Medicare fees are cut on Jan. 1 because Congress did not heed our warnings about the SGR.

Medicare cannot claim to put the interests of patients first if it continues to devalue the important work of the doctors who actually care for those patients.

Robert B. Doherty is ACP-ASIM's Senior Vice President for Governmental Affairs and Public Policy.


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