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Physicians Uniting to Battle Flawed Medicare Reimbursement Formula

Ben Leach and Nick Sambides, Jr
Published: Monday, Oct 24, 2011
fighting the Flawed Medicare
Reimbursement FormulaAs millions of Americans grapple with changes in Medicare and other health insurance coverage, thousands of oncologists could find their medical practices threatened by insolvency. In addition, the federal government’s deficit could grow considerably if Congress does not attempt to fix the flawed Medicare physician payment system.

Oncology professionals from around the country and the American Medical Association (AMA) have been voicing their concerns to Congress for a number of years, stating that the current reimbursement system is forcing clinics across the country to shut their doors, preventing patients from receiving optimal care.

“These proposed cuts to cancer care are creating the perfect storm,” said Ted Okon, executive director of the Community Oncology Alliance (COA), a group representing hundreds of community oncologists around the country.

Okon said that the effects of an imperfect reimbursement system are already being felt in a system that is already strained for resources.

Sustainable Growth Rate

In 1997, Congress established a sustainable growth rate (SGR) formula for reimbursing physicians who treat Medicare patients. The formula was based on healthcare costs and the general economy at the time. Today, if a physician’s expenditures for treating patients exceed the SGR, then reimbursement is cut. Since medical costs have risen at a rate greater than inflation, cuts to the SGR have been proposed for some time.

While cuts have been averted for the last few years, a 29.5% cut to the SGR is set to take effect on January 1, 2012, unless Congress intervenes before then. The proposed 29.5% cut is “simply unacceptable,” said David Adler, director of government relations for the American Society for Therapeutic Radiology and Oncology (ASTRO), a 10,000-member organization whose membership includes 5000 domestic radiation oncology physicians. “Congress needs to act— and act fast—to once and for all stop these cuts and fix the sustainable growth rate formula that leads to these cuts.”

Congress has intervened 12 times since 2002 to prevent cuts to reimbursement provided by the SGR formula. In 2010 alone, 5 separate federal bills were passed to stop a 22% cut, said Cecil B. Wilson, MD, immediate past president of the AMA and an internist based in Winter Park, Florida, who testified on the funding formula before the House Energy and Commerce Committee’s Subcommittee on Health.

“The formula is flawed and it has not worked right…almost since its inception,” Wilson said. “Physicians are now being paid by Medicare essentially at the same rate they have been paid since 2002. It is becoming increasingly difficult to see Medicare patients because of this.”

In 2003, the Medicare Modernization Act (MMA) was passed, effectively changing the reimbursement model for cancer drugs. Under the MMA, physicians were reimbursed for the average sales price of the drug rather than the average wholesale price. When the wholesale price reimbursement model was in place, many physicians were overcompensated for drugs, but in turn, these funds were used to offset nonpayment and underpayment of other cancer treatment options.

Congress was supposed to revise the MMA to account for unreimbursed services, such as treatment planning, but that has yet to happen. According to the COA, many drugs are reimbursed at a rate less than cost.

Limiting Services to Medicare Patients

The Medicare Payment Advisory Commission (MedPAC), a congressional agency that provides Congress with independent, nonpartisan policy and technical advice on Medicare issues, reported that 1 in 4 new Medicare patients has difficulty finding physicians willing to treat them. In addition, a recent AMA survey found that about 57% of doctors who responded reported being forced to “limit” services to Medicare patients due to a lack of Medicare reimbursement funding.

Adding urgency to the issue is the fact that Medicare serves more than 46 million beneficiaries, a number that will continue to grow as more baby boomers age. The year-toyear instability of the funding formula situation leaves physicians unable to “reliably plan ahead or fully cover their rising practice costs,” said Mark B. McClellan, MD, PhD, director of the Brookings Institution’s Engelberg Center for Health Care Reform, in his testimony before Congress.1,2

“The result is frustrating, putting pressure on physicians to do more for patients with less, and growing difficulty for physicians in bearing the cost of all the things Medicare pays for poorly, if at all: coordinating care across the different providers who see beneficiaries, educating patients about how they can stay well or manage their health problems, delivering care in less costly settings, and even spending extra time with them when they need it,” McClellan added.


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