The Medicare Gordian Knot

In recent months, and for that matter for several years, there has been much said and even more implied by media pundits and government officials about the so-called “Doc-Fix” being debated in Congress. Rarely have you heard anything substantive from the docs themselves; that is until now. Pay close attention, because what follows is the unbridled TRUTH!

The Medicare program payment system for physicians is defined under Part B.  Back in 1965 Medicare was designed to function like any other insurance policy, but just for seniors. Much has changed over the years, and I won’t get into those details except to refer you to an earlier post where the history of Medicare payment is outlined. (“The Future of Healthcare in America” The result of those changes has been to progressively bind America’s physicians to the program through a complex system that now resembles a Gordian Knot.

Here’s how it works, from a physician’s point of view. When you start your practice you are asked to sign-up to be a Medicare provider. Sounds like a good idea, so virtually every doc does just that. In fact, in today’s “job market”, where more and more physicians are being hired as employees of hospitals or large group practices, the employer typically requires the doc to be a Medicare provider.  It is certainly possible to practice medicine without “enrolling” with Medicare, but very few physicians even consider that option, largely because they don’t have a clue what a mess they’re getting into.

The first decision the doc must make is whether or not to accept Medicare’s assignment of benefits for all patients. Medicare refers to those who accept assignment as “participating” providers. But, participating comes with an additional caveat; you also agree to the Medicare fee schedule. Unfortunately there is no way to know what the fee schedule is before signing-up, and there are actually several different fee schedules depending on the part of the country where you practice.

When a claim is submitted, the amount Medicare allows for each code is based on a process known as RBRVS (Resource Based Relative Value System) developed more than 20 years ago. Once a determination is made as to how much Medicare allows for the specific service they will pay 80% of that amount. As a participating provider, the physician can then bill the patient or their secondary insurance carrier, but only for the 20% that Medicare approves but doesn’t pay. Any amount the physician bills above what Medicare allows, must, by law, be written off. This is the definition of price fixing.

The other category available to the physician is “non-participating”, which sounds like it would provide more freedom, but not really. Physicians who decide on this option are allowed to bill their patients for 15% more than the Medicare allowable, but even that isn’t quite as it appears. Medicare adjusts the allowable fees for non-participating physicians down to 95% of what is allowed for participating physicians. So, once you do the math, the maximum a non-participating doc can actually receive, assuming the patient pays the full amount allowed is only 9.25% more than participating physicians. Not many docs opt for the “non-par” status.

On top of these decisions regarding participation, every physician is personally responsible for electronically submitting an accurate claim. Medicare employs a complex coding system known as CPT (Current Procedural Terminology) to determine what they will pay, and there are nearly 8,000 individual codes for all the various services that physicians offer. Each code may potentially be further modified using one of a dozen or more “modifiers”, depending on the specifics of any given circumstance. There are also a complex set of criteria that must be met to justify using certain codes, and if a claim is submitted using a code that is paid at a higher amount than what the doc can document, that is considered “Medicare fraud” and is punishable by a fine of up to $50,000 per occurrence. Needless to say, most physicians tend to “under-code” to avoid a visit from the Department of Justice or the FBI.

There is still another option for docs who don’t want to be bound by the Medicare system and that is to “opt out”. This means you are not recognized by Medicare as a provider, and are free to contract with your patients on an individual basis. To discourage this type of “greedy” and “mean-spirited” behavior, Medicare requires that any physician who opts out of Medicare must remain out of the program entirely for a minimum of two years. During that time it is illegal for the doc to submit any claims to Medicare. Oh, and one more minor detail; if a Medicare patient seeks care from a physician who has opted out, the patient is also prevented from submitting a claim to Medicare or obtain any reimbursement for those services, even if they are covered benefits. This is a convenient way of coercing both physicians and patients to just play by the Medicare rules.

All of this might be tolerable if Medicare payments were reasonable, but in many cases the amount Medicare allows is insufficient to cover the cost of providing the service, and the problem is only getting worse. With growing concerns in Congress about Medicare potentially running out of money, a formula was developed 15 years ago designed to adjust the physician fee schedule annually, depending on how much was spent the year before. It is called the SGR (Sustainable Growth Rate), which is anything but sustainable and is the opposite of growth. Each year since 2002 this formula has mandated cuts in physician fees of between 3% and 5%. However, such cuts threatened the viability of the Medicare program since they would force many docs to “opt-out”. So, on each occasion the Congress intervened at the eleventh hour (late December) to halt the cuts and on a few occasions actually authorize a slight (1%) increase in physician payments.

Over the past 10 years the SGR mandated cuts have accumulated and now call for physician fees to be reduced, across the board, by 27.4%. To repeal the SGR requires Congress to come up with a way to pay for the $220B that is sitting on the books as a debt owed to Medicare, and that is what they mean by the “Doc-Fix”. Unfortunately this is a political “hot-potato” with no easy solution. Or is there?

In May 2011, Rep. Tom Price, MD (R), GA, introduced HR-1700, the “Medicare Patient Empowerment Act” (MPEA), and Sen. Lisa Murkosky (R), AK, introduced a companion bill in the Senate, SB-1042. This legislation would change the physician participation restrictions, allowing docs to independently and privately contract with any Medicare patient for a mutually agreed to fee, specifically for non-emergent services, which might differ from the fixed-fee allowed by Medicare. The reason this bill is called the Medicare Patient Empowerment Act is quite simple. Should the system be allowed to go on as is, Medicare patients will soon find themselves unable to find a physician willing to work for what Medicare pays. Then, if the patient decides to go to an ‘opted-out” physician they will lose the benefits they have paid into for many years. This is quite simply unfair. This bill would solve the problem by “empowering” each patient to use their Medicare benefits however they see fit when seeking the care they need and desire.

So, in the final analysis, what the media should be talking about is not a “Doc-Fix” but rather a “Patient-Fix”. And the Congress should cleave the Medicare Gordian Knot before the entire program deteriorates into total chaos.



The opinions expressed herein are my own and do not necessarily reflect or represent the policies or opinions of any medical organization or group.

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