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Here again: another round of looming Medicare cuts?

From the April ACP Observer, copyright © 2005 by the American College of Physicians.

By Robert B. Doherty

Yogi Berra's famous phrase, "It's déjà vu all over again," epitomizes the latest iteration of the ongoing Medicare reimbursement saga facing internists.

Does any of the following sound familiar?

Unless Congress acts to change the law, Medicare payments will be cut by more than 5% on Jan. 1, 2006, and by comparable amounts each year for the next seven. The cuts stem from a formula that Congress created in 1997 called the sustainable growth rate (SGR). The SGR adjusts the annual inflation update to physicians based on physician expenditures and other services compared with the gross domestic product (GDP), which measures the growth of the overall economy.

When growth exceeds per capita GDP—as economists are projecting it will do for at least the next eight years—the variance is subtracted from the annual inflation update. The result: across-the-board cuts in payments to physicians that will continue as long as the formula is maintained and as overall expenditures exceed the allowed target rate of growth.

If this sounds familiar, it is: This is the fifth consecutive year that physicians have faced SGR-related cuts. In 2002, Congress allowed a cut of approximately 5% to go into effect. In the subsequent three years, physicians would have seen additional annual cuts of between 4% and 5% had Congress, through legislation, not halted the cuts and replaced them with small positive updates.

Congress' actions were due to efforts by ACP, the AMA and other specialty societies to demonstrate the devastating impact that more reductions would have on patient care. Unfortunately, though, Congress' remedy treated only the SGR's acute symptoms—the immediate cuts—not the underlying disease, which is the formula itself. By enacting only stop-gap measures instead of scrapping the SGR altogether, Congress made sure that taxpayers would have to pay even more, at a later date, to dig the system out of even deeper cuts.

The stakes for internists

While Congress has delayed inflicting financial pain on internists, the day of reckoning may be here. Medicare's actuaries project that unless Congress acts to prevent another round of reductions from the SGR formula, Medicare payments to physicians across-the-board will be cut by more than 5% in 2006. From 2006 through 2013, payments will be reduced by 31%.

Over this eight-year span, Medicare reimbursement for a level-four established patient office visit (CPT 99214) would go from $82.62 in 2005 to $56.54 in 2013. An internal medicine practice with an average amount of Medicare patients will lose more than $56,000 a year.

Internists who see more Medicare patients than the average would experience even greater losses, with geriatricians at risk for the deepest cuts. And none of this takes into account the real dollar impact of SGR cuts once inflation is factored into the formula.

Making the case

Persuading Congress to act—again—on halting the SGR will require the College and other allied groups to launch a massive lobbying effort. Although most lawmakers will say they understand the urgency of averting more Medicare payment cuts, they are less willing to commit to any specific course of action.

Completely eliminating the SGR formula could cost as much as $100 billion over the next 10 years, a formidable obstacle at a time when the federal government is experiencing record budget deficits. (The estimated $100 billion price tag reflects the simple fact that Medicare saves money from the current SGR formula—money, of course, that comes out of the hides of physicians and their patients.)

Because of the cost, Congress will be tempted to enact another one-year temporary reprieve, to be paid for at some later date by even deeper cuts in physician payments. Although another one- or two-year reprieve would be better than allowing the cuts to go into effect, the College believes strongly that now is the time for Congress to discard the SGR and replace it with a formula that bases annual increases on changes in the costs of providing physician services.

Getting lawmakers' attention

The College will be framing the issue in a way that should get lawmakers' attention.

We will argue that the cuts will accelerate the already alarming trend of medical students who are turning away from general internal medicine, because they will be reluctant to enter a specialty that is so dependent on Medicare.

We will make the case that practicing internists will be forced to limit the number of Medicare patients they see, and that physicians nearing retirement will likely choose to close shop early. The consequence will be an insufficient number of general internists to take care of the Medicare population, at a time when those numbers will grow rapidly due to the aging baby-boomer population.

We will also argue that SGR payment cuts will pose an insurmountable obstacle to President Bush's goal of creating an interoperable system of electronic medical records (EMRs) to support quality improvement. The simple economics of running an internal medicine practice are such that very few internists will be able to afford to buy EMRs when their practices are experiencing Medicare revenue cuts of more than 30%.

Finally, the College will say that scrapping the SGR is a prerequisite to broader reforms in the dysfunctional Medicare payment system. Promising ideas, such as rewarding internists for effective management of patients with chronic disease, can't take place in an environment of across-the-board payment cuts.

As we present our arguments for eliminating the SGR, ACP will be calling on its membership for help. Members of Congress won't be persuaded if they hear only from the College's lobbyists in Washington. They will need to hear from internists in their own communities about how SGR cuts will adversely affect Medicare patients' access to care; the number of new physicians who will choose to go into general internal medicine; the ability of internists to invest in information technology; and the basic economic realities of running an internal medicine practice. ACP members can receive regular information from the College's Washington office on what they can do to help by signing up to become an ACP Key Contact.

It is no exaggeration to state that halting the next round of cuts may be critical to the survival of internal medicine. With the stakes so high, the College is confident that ACP members will rise to the occasion, to ensure we won't have to face "déjà vu all over again" in 2006.

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

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