Government Health Plan To Cut Physician Pay by 27% in 33 Days

Doctors warn that U.S. health care  will implode if government health plan cuts physician pay by 27% in the next 33 days. Many will no longer accept government health care patients, exacerbating  the shortage of access to care in this country for those reliant upon government health care.

Doctors who serve Medicare patients are facing a 27.4 percent cut in payments beginning Jan. 1 unless Congress acts to create a “patch” to the 1990s-era calculation for determining the value of medical services. 

The perennial “doctor fix” is the latest casualty of the Super Committee’s inability to come to a deal on deficit reduction. Without the temporary boost in payments Medicare sets for medical professionals to take care of seniors and the disabled, doctors warn that millions could see their health care choices limited. 

“I don’t see how primary care doctors could take anywhere near like a 27-percent pay cut and continue to function,” said Don Klitgaard, a family physician at a local medical center in Harlan, Iowa. “I assume there’s going to be a temporary fix, because the health care system is going to implode without it.”

“As recently as 2005 the cost of permanent reform would have been $48 billion; in five years the cost will be $600 billion. Permanently fixing this problem to preserve seniors’ health care now and in the future must be a top priority,” Peter W. Carmel, president of the American Medical Association, said in a recent statement.

Last year, the cut in payments to doctors would have been about 20 percent had Congress not come up with a temporary fix. 

The perennial fix is the consequence of a 1990s budget law that failed to control spending but was never repealed. But this year, with no one in Washington easily stomaching additional deficits, lawmakers are loathe to use the patch.

“Even Superman couldn’t subtract $1.2 trillion from the budget gap by adding the $300 billion in spending required to restore a scheduled 27 percent pay cut to physicians,” said Jane Orient, executive director of the American Association of Physicians and Surgeons, said of the Super Committee’s failure to find a remedy to the payment system. 

Both the AMA and AAPS blame the deficits on the formula used by Medicare to determine doctors’ fees. The Clinton-Gingrich Sustained Growth Rate formula, passed in 1997, was supposed to cap expenditures. 

“Doctors might want to ask Newt Gingrich what he thinks about it now. Was it intended to cut spending by cutting the supply of doctors?” Orient said.

“We find ourselves here again because Congress has repeatedly put in place short-term ‘patches’ to a policy — the sustainable growth rate formula — that everyone agrees is fatally flawed and must be repealed,” the AMA said in an email to “These patches have grown both the size of the cut and the cost to taxpayers for permanent repeal of the formula.”

But the AAPS argues that the 15,000 five-digit “CPT” — called the Resource-Based Relative Value Scale — is also a money-waster. The coding system, Orient argues, is bringing $70 million a year to the AMA in licensing fees.

“What if we forgot about the SGR diversion and just abolished the RBRVS? Without that, there is no need for codes. Would you miss them?” Orient asked in a release. “If Medicare payments are less than the cost of care, forcing doctors to quit, why not reduce the cost of care? Why not do a radical administrativectomy? Cut the codes, not the patients.”

The AMA responded that the CPT and the broken Medicare physician payment formula “are completely unrelated,” noting that the CPT primary coding system was created in 1983. 

“Not a single taxpayer dime is paid to the AMA for the use of CPT in the Medicare and Medicaid programs. Studies show that physicians’ administrative costs are mainly driven by the lack of a single transparent set of payment rules among health insurers,” the AMA said.

Setting aside the dispute over coding, Congress is more likely to go with temporary patches paid by offsets in other areas of the budget. A one-year fix would cost $22 billion in offsets, two years would equal $35 billion. Ten years would equal $300 billion.

“It’s going to be a real challenge, and there’s not a lot of time to play ping-pong,” a health care lobbyist who asked to remain anonymous told The Associated Press. “It’s entirely possible given past performance that Congress misses the deadline.”

“They have to come up with a solution, and they will have to appear to pay for that solution, and that will be contentious,” said economist Robert Reischauer, one of the public trustees who oversees Medicare and Social Security financing. One option: cut other parts of Medicare. Another: trim back spending under the health care overhaul law. Either of those approaches would mobilize opposition.

A nonpartisan panel advising lawmakers is recommending that doctors share the pain of a permanent fix with a 10-year freeze for primary care physicians and cuts followed by a freeze for specialists. Doctors aren’t buying that.

The Obama administration says seniors and their doctors have nothing to fear. But doctors are becoming increasingly irritated about dealing with Medicare. 

Surveys have shown that many physicians would consider not taking new Medicare patients if the cuts go through. Some primary care doctors are going into “concierge medicine,” limiting their practice to patients able to pay a fee of about $1,500 a year, a trend that worries advocates for the elderly.

Ultimately, the solution is an overhaul of Medicare’s payment system so that doctors are rewarded for providing quality, cost-effective care, said Mark McClellan, an economist and medical doctor who served as Medicare administrator for President George W. Bush. That continues to elude policymakers.

Instead, the threat of payment cuts has become a holiday tradition, said McClellan. “It’s just not a very enjoyable one.”

The Associated Press contributed to this report.