Congress needs to fix formula for paying Medicare and Tricare doctors

Congress has known for a decade that the formula it set in 1997 for adjusting physician payments under Medicare — and by extension the fees paid to civilian doctors under Tricare, the military’s health insurance program — is seriously flawed and can’t be allowed to take effect.

But rather than rewrite the formula, which the American Medical Association says would have cost $48 billion in 2005 but would exceed $300 billion today, Congress chooses each year to delay its effect.

It dangles the flawed formula and the fee cuts it would trigger over the heads of physicians treating Medicare and Tricare patients. Then, as the effective date nears, and patients worry their doctors will drop them, lawmakers vote to delay the formula’s effect a while longer.

Meanwhile, the gap between what Medicare and Tricare pays doctors, and what would be permissible under the 1997 formula, widens every year. For example, if Congress had not voted Dec. 23 to block use of the formula again, Medicare and Tricare fee reimbursements would have fallen in January by 27 percent. The size of threatened rate cuts was 25 percent last December and 21 percent early in 2010.

The vote this time delayed the cut in doctor fees a mere two months, until March 2012. The same package also delayed for two months a 2 percent scheduled increase in the federal payroll tax and a planned cutoff of unemployment benefits to several million out-of-work Americans.

“I’ve very nervous when I see a two-month patch like this,” said Dr. Robert M. Wah, a reproductive endocrinologist and ob-gyn physician who is chairman of the American Medical Association’s Board of Trustees. In 2010, Congress approved five separate patches to keep the flawed rate formula at bay.

“We may be starting another season of patches,” said Wah, a retired Navy doctor who still practices and teaches at Walter Reed National Medical Center at Bethesda and at the National Institutes of Health. “The problem is we have a very leaky boat and we keep putting patches on it. What we really need is a new boat. And these patches are very expensive.”

If lawmakers continue to dawdle over this issue, the cost of the doc-rate fix will nearly double to $600 billion in five more years, Wah said. Included in that figure is the extra cost of making temporary patches which will climb from $22 billion in 2012 to $92 billion in 2016, the AMA argues.

“I’ve told Congress there is a tumor in the [federal] budget that grows every day. It needs to be dealt with. And the longer they put it off, the more expensive and painful it’s going to be to fix,” said Wah.

The problem began with the Balanced Budget Act of 1997, which sought to control Medicare costs using something called a Sustainable Growth Rate (SGR) formula to set spending targets on physician services. For years in which the annual target is met, doctor fees are adjusted by the rate of medical inflation. But when spending exceeds the target, the formula calls for lowering doctor reimbursements.

From the start targets were set too low, critics contend. They failed to take into account cost growth tied to factors such as advances in medical technology and an expanding number of physician services.

Health care providers already point to low reimbursement rates as the top reason they won’t accept Tricare users as patients, according to a June 2011 report on patient access by the Government Accountability Office

The American Medical Association conducted a more detailed survey of physicians and Medicare fees in 2010. Two findings were striking, Wah said. One of every 3 primary care physicians said they were forced to limit their number of Medicare patients in their practices because of low payments. Among physicians overall, including specialists, 1 in 5 limited the number of Medicare patients because of current reimbursements.

Wah said those findings might not reflect physician attitudes toward Tricare patients who usually are a smaller part of their practice. Also, Wah said, most physicians he knows try “to do their part to take care of Tricare patients out of a sense of duty and recognition of the sacrifices military members and their families have made.”

“But there’s a limit to that, right?” Wah added. “I mean at some point the finances do come into play.”

Even without the threat of a 27 percent cut in fees, Wah said, doctors believe Medicare and Tricare reimbursements haven’t kept pace with their costs of sustaining their practices.

“Rent has gone up; salaries go up; benefit costs go up; insurance goes up. But Medicare and Tricare payments have not kept up,” Wah said. “So now there’s a 20 percent gap between … the cost of running the office versus rate of payment for taking care of seniors and military families. That 20 percent gap is a huge challenge for physicians.”

Sam Hutchison, office manager for Senior Health Services, a practice specializing in patients 60 and older located near Fort Bragg in Fayetteville, N.C., says a 27 percent cut in fees would spur many private practice doctors to stop treating Medicare and Tricare patients or to stop accept new ones.

But his clinic, which is associated with a local hospital, exists to treat Medicare and Tricare for Life patients. Timely clinical care, even with fee cuts, is seen as more cost effective than having patients ignore their health until catastrophic illnesses requires emergency care and hospitalization.

Hutchison said the fight in Congress appears to be between defenders of insurance companies and advocates for physicians, with patients caught between. His physicians were delighted to see the Obama health reform law require Medicare to cover co-payments for preventive services such as prostate exams, colonoscopies, bone density screens and mammograms.

“Giving our physicians the ability to turn a wellness check with a Medicare patient into a complete physical, and actually reimburse us for the time spent doing it, was moving in the right direction. And now they are doing the complete opposite,” said Hutchison, threatening to cut fees again.

To comment, email, write to Military Update, P.O. Box 231111, Centreville, VA, 20120-1111 or go to

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