SDCMS and CMA Fight to Undo Deeply Flawed Medicare Formulas

Note: The following letter, requesting GPCI reform, was sent to all San Diego County U.S. Representatives, asking them to co-sign the letter to Speaker Pelosi and Representative Farr.

April 6, 2009

Congresswoman Susan Davis
U.S. House of Representatives
1526 Longworth HOB
Washington, DC 20515

Dear Congressman Davis:

The San Diego County Medical Society (SDCMS), representing the over 8,000 physicians in San Diego County, would like to again express our thanks, on behalf of San Diego County’s doctors and patients, for your efforts in 2005 and 2006 to correct Medicare’s geographic payment system, which continues to inappropriately combine San Diego County and other high-cost counties with the rest of California’s rural counties. The Center for Medicare and Medicaid Services (CMS) and Congress have both acknowledged that the current Medicare payment system results in payments out of alignment with the intent of the geographic adjustment formula (Geographic Practice Cost Index, or GPCI). San Diego County physicians have been directly impacted by over $30 million in underpayments in the past year alone because they are unfairly and inappropriately lumped with other, lower-cost counties in California.

Despite years of efforts, nothing has yet been done to correct these significant underpayments for physician services. This results in greater difficulty in maintaining access to care for San Diego County seniors, and, as noted in the report by the Abaris Group regarding San Diego County’s healthcare safety net, adversely impacts access to care for safety-net recipients. The recent Acumen report confirms our prior concerns about the inaccuracy of the GPCI system and calls for correction of such inaccuracies in order to meet the goals intended under Medicare payment rules.

This problem has only grown since the 1997 implementation of the current payment system, based on data not updated since 1966, despite changing demographics and increased costs in formerly rural areas that are now urbanized.

We now have another opportunity to try to address this problem, as Congressman Farr and Speaker Pelosi begin meetings to seek a resolution to the underpayments affecting 10 counties in California and over 140 counties nationwide.

We ask that you co-sign the attached letter to Congressman Farr and Speaker Pelosi, asking them to update the Medicare geographic payment system with immediacy. This is an issue of fairness and of preservation of access to care.

We look forward to your help in resolving this ongoing, significant, and unfair underpayment to San Diego County physicians.

Stuart Cohen, MD, MPH
President, San Diego County Medical Society (SDCMS)

Enclosure

April 6, 2009

Congresswoman Nancy Pelosi, Speaker of the House
U.S. House of Representatives
235 Cannon HOB
Washington, DC 20510

Congressman Sam Farr
U.S. House of Representatives
1126 Longworth HOB
Washington, DC 20515

Dear Speaker Pelosi and Congressman Farr:

On behalf of the Medicare patients and physicians in our districts, we urge you to enact Medicare physician geographic payment locality reform this year. Physicians in 32 states and 174 counties are inaccurately paid up to 14 percent less per year than their Medicare-assigned geographic cost factors, and we are concerned about protecting seniors’ access to doctors in some of these counties. While repeal or modification of the flawed Sustainable Growth Rate (SGR) formula is the top Medicare physician priority because of its impact on physician practices in every state, a Medicare geographic payment locality update is long overdue and urgently needed.

As you are aware, the Medicare fee schedule adjusts payments for physicians based on their geographic practice costs (i.e., office rent, supplies, staff wages, malpractice insurance). However, despite major demographic changes across the country, the Medicare geographic payment localities have not been regularly and fairly updated since 1966 except for a consolidation 10 years ago.

We are concerned that access to doctors in some of these significantly impacted counties is a real problem. For instance, physicians in California’s Santa Cruz County are paid roughly 10 percent less than what Medicare says it costs to practice medicine in Santa Cruz. They are paid 25 percent less than physicians in neighboring Santa Clara County, which has similar practice costs and is the highest paid Medicare locality in the country. San Diego County is the most fiscally impacted, with physicians being underpaid by over $30 million annually for services provided to Medicare beneficiaries, compared with what should be paid if San Diego County were under an accurate payment system as required under Medicare rules. This is further compounded by private payers basing their fee schedules on the flawed undervalued Medicare fee schedule for San Diego County. These private payers are underpaying for services — impacting access to care — in large part due to the failure of the Centers for Medicare and Medicaid Services (CMS) and Congress to address this issue for nearly a decade.

CMS could fix the problem, but they have been unwilling to impose a budget-neutral solution, which is required by law. While an update significantly helps physicians in these impacted counties, it simultaneously imposes a payment reduction on rural physicians.

Therefore, we urge you to develop legislation that provides payment accuracy to these underpaid counties while protecting rural physicians from pay cuts. Several proposals to improve both accuracy and administrative simplicity in payment have been put forth, including migrating impacted counties, or even all counties, to an MSA-based system (Metropolitan Statistical Areas) as is used for hospitals and other non-physician providers. Counties whose geographic adjustment factor (GAF) exceeds their locality GAF by 5 percent on an iterative basis need to be made whole in order to maintain access to care for seniors and other Medicare beneficiaries, as well as for the public in general.

You will be reviewing specific proposals for such an update from the California Medical Association (CMA) and the recent Acumen report, which also supports such changes. We urge you to work with these proposals and CMA to expeditiously correct the underpayments while holding harmless the rural counties that might otherwise be negatively impacted by a purely budget neutral solution. As such proposals become more defined, we request that you keep us informed and allow us to present our input before a final decision is reached, while still moving to fix this broken system as quickly as possible.

Congress must ensure geographic payment accuracy in the Medicare program, which currently does not exist when San Diego is still considered a rural farm town under the Medicare payment system. We can correct years of neglect and bring geographic payment equity to the Medicare program for a relatively minor cost, bringing back required payment accuracy and administrative simplicity. We must protect access to doctors in these impacted counties while not harming patients in rural areas. Thank you for your action on this important issue.

Sincerely,

Members of Congress