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Thursday, July 10, 2014
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Published: Monday, 8/29/2005

Projected Medicare cuts would only worsen health care crisis

A CRISIS is looming in our country and not many people are taking note. It involves Medicare and diminishing access to health care for the elderly.

It all started in 1997 when in order to slow down the ever-escalating cost of health care to the elderly Congress passed the Balanced Budget Act of 1997. Medicare payments for professional services were to be calculated through a formula called the sustainable growth rate. It was intended to reduce the rapidly increasing cost of medical care to the elderly. The payments were pegged to the usual economic indicators that are used for projecting forecasts. Unfortunately the fancy mathematical formula did not take into account the cost of maintaining a medical practice. The premise of the legislation was to reduce payments to physicians and other health care professionals over a period of time. This approach has not worked. Instead we have a mess on our hands.

While Medicare reimbursement for physicians has, in net terms, gone down steadily since 1991, the cost of maintaining a medical practice has gone up a staggering 45 percent and is projected to reach 60 percent in the next six years. The most significant reason for this runaway escalation is the cost of malpractice insurance.

Against this backdrop let us see what happened to physician reimbursement in real terms. From 1991 through 2001 the Medicare payments to physicians lagged behind the cost of maintaining a medical practice. Since 2001 the two graphs have diverged dramatically; practice costs going through the roof and income steadily going south. With the projected Medicare reimbursement cuts scheduled for the next six years, the two graphs would continue on their divergent course. By 2011 the income would have dipped 15 percent below the 1991 level and the expenses would have risen more than 60 percent. No business in the world could sustain this kind of disparity between income and expense.

The effects are becoming obvious. In this weird Rube Goldberg-like business model, business owners, read physicians, are being forced to subsidize their business. On a personal note, this is exactly what I was forced to do in the last two years of my surgical practice. I could not on one hand pursue my passion for surgery and on the other hand keep subsidizing it. Toward the end it had become a rather expensive hobby. Most physicians in our country find themselves in the same situation.

So in order to survive financially, most of them do what any business would do under such circumstances: stop doing business with clients who are unable to pay. In this case, however, the patients are themselves helpless victims of a weird system. Their bills are supposed to be paid by Medicare, but Medicare is not paying what it ought to pay.

According to a recent survey by the American Medical Association, if the projected cuts in reimbursement were enacted as planned, more than one-third of physicians would not accept new Medicare patients in their practices. Already a quarter of physicians are doing just that.

So what is the solution?

Congress and the administration need to realize that our health care is in crisis and the same laws that are supposed to help the elderly are instead hurting them. They should get rid of the sustainable growth rate formula and replace it with an equitable formula that ties Medicare payments to not only the usual economic indicators but also the cost of maintaining a medical practice. There are three bills before the Congress to address these very concerns. But Congress will only move, as it always does, when the American people demand a change. I think the time for change is here.



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