The Squeeze Is On
California physicians received two lumps of coal from the government for the holidays. Despite intensive lobbying, education of legislators, and even expressions of widespread support for physician payment levels, effective January 1, 2006, Medicare reimbursement was reduced 4.4 percent according to the Sustainable Growth Rate (SGR) formula. Unless SGR is modified or repealed, more cuts will come. On top of that, Medi-Cal cut California physician reimbursement 5 percent effective January 1, 2006 — a rapid action by our governor to “balance the budget” even though the state was showing a surplus. Why are physicians being cut again while many hospitals are showing record profits (1) and January 1, 2006, will be a windfall date for health plans and drug companies with the new Part D of Medicare?
In my January 2006 editorial, I expressed a bleak outlook for physician reimbursement in 2006. I had no idea the news would be this bad so soon. Physicians are clearly the losers in the reimbursement “game” with Medicare and Medi-Cal. What are we to do? Doesn’t the delivery of medical care start with physicians?
Many physicians in private practice started to lose trust with the government as a payer long ago. These cuts will further erode this trust. The July 2005 San Diego Physician cover article asked “Will the last physician in San Diego County accepting Medicare patients please turn out the light?” How prophetic!
Not all physicians are suffering. If reimbursement is tied to institutional procedures, such as imaging and clinical laboratory, things are not too bad. Physicians in large groups that have learned to succeed in Medicare and Medi-Cal managed care plans will continue much as before. It is the independent physician in private practice who really suffers when the government, which pays for more than 40 percent of all healthcare, further cuts reimbursement. Independent physicians are either getting squeezed out of practice or are going directly to the public for reimbursement. Consumer-driven healthcare, here we come!
What baffles me in the current situation is why physicians stand almost alone as losers in the reimbursement “game” with Medicare and Medi-Cal? California is last in the nation with physician reimbursement and per capita spending in Medicaid. It certainly is not for a lack of leadership and influence of SDCMS and the California Medical Association. Do the government payers simply think they can get away with cutting physicians more than hospitals and drug companies? Are the other institutions simply more powerful or influential?
Not knowing the answers to these questions, I turned to our fearless leader, Bob Hertzka, for insight. He shared with me his expressed opinion on the CMA Board Discussion Group:
“[…] We (physicians) are so irreversibly and collectively addicted to the diluted ‘fix’ that Medicare pays us that few will change their patient access levels as a result of these cuts. That is the problem. Consider that the 1997 Balanced Budget Act cut to hospitals shuttered thousands of beds, hundreds of ERs, and dozens of entire institutions. Similarly, a prior 5 percent cut to health plans disenrolled millions of Medicare recipients several years ago. Note that these two entities are no longer at risk for cuts, unlike physicians, who have in some cases absorbed cuts of > 50 percent during RBRVS, and who in all cases have been essentially frozen for five years. The only thing anyone in Congress or in the public square will ever pay attention to is a decrease in Medicare access, which has nothing to do with collective action but everything to do with rational business decisions by the economic sector known as practicing physicians.”
San Diego leadership can be proud that Carol Young, SDCMS immediate past president, and Jim Hay, former SDCMS president and current CMA vice speaker, went public in the January 8, 2006, San Diego Union-Tribune with their refusal to accept this action and reluctant closure of their practices to new Medicare patients. None of us wants to stop seeing our patients and say no to members of the community that want us as their physicians. The reality is that we cannot work in a system that pays us less than our costs to care for patients. Either the future is for patients to be left with the costs of their healthcare or the insurance systems need to pay physicians appropriately. Improving government budgets or health insurance bottom lines on the backs of physicians may have reached the breaking point. More California physicians will have broken backs in 2006.
America may have a new endangered species, the independent, private medical office. The public expects whatever health insurance they have to cover their healthcare — and, by the way, they want that insurance to cost as little as possible. Large medical groups and health systems have the purchasing power to manage reimbursement challenges and will simply stop taking an insurance plan that refuses to cooperate. Revenue shifting from lab, X-ray, and revenue generating procedures buffer the transitory losses. Independent, private physician offices do not have such purchasing power or revenue options. Direct payment by patients will return medicine to its roots but will not be an option for those who cannot afford to pay for their care. What we now have as choice of healthcare models may become fixed stratifications, with physicians in various settings caring for patients who pay cash, have managed care, Medicare, and Medicaid. We learned in the 1990s that people do not like to lose their choices. 2006 may turn out to be an interesting year for health economics and health policies. Meanwhile, get your patients to complain to their legislators about Medicare and Medi-Cal not paying their physicians fairly, and how important we are to them.