Medicare woes add to practice difficulties

June 1, 2005

Should the cuts take place as planned, 18 percent of physicians surveyed by the American Medical Association say they would stop accepting new Medicare patients; 57 percent would decrease time spent with patients; and 46 percent would reduce staffing levels.

If the federal funding formula isn't changed, large numbers of dermatologists may reconsider their participation in the Medicare program, and some may close their practices, says Laura Edwards, director of federal affairs for the American Academy of Dermatology.

Even so, the trustees' report underestimates what has been a long-term problem, says Brett Coldiron, M.D., a Cincinnati-based dermatologist and a Medicare expert.

As overhead costs rise 10 percent to 20 percent a year, cuts slice deeper into thinning profit margins, notes Margaret Parsons, M.D., chairwoman of the AAD's Council of Government Affairs and Health Policy and Practice. The question dermatologists face, she says, is how to give good care as physicians and keep the doors open as small business owners.

AMA on the offensive J. Edward Hill, M.D., president of the American Medical Association, has warned Congress that if something isn't done soon about the reimbursement schedule, patient care and access will suffer. A recent survey of AMA members supports this contention. If reimbursements were to be cut by 5 percent in 2006 (an earlier estimate of Medicare cutbacks), 38 percent of physicians reported they would decrease the number of new Medicare patients accepted, 57 percent would reduce time spent with Medicare patients, and 46 percent would reduce staffing levels.

The flawed formula Just about everyone on the healthcare side of the situation agrees on the source of the problem - Medicare's Sustainable Growth Rate formula, which is used to calculate the annual update in physician payments. The formula has four variables: medical inflation, enrollee growth, payment changes due to new laws or regulations, and projected growth in gross domestic product.

"Based on the formula, CMS (Centers for Medicare and Medicaid Services) produces a new fee schedule each year," Ms. Edwards says. "Payments can go up or down for individual procedures, but the schedule never stays the same."

Since enacting the sustainability formula, Congress has intervened with annual fixes. Last year it converted a 3 percent cut calculated by the formula to a 1 percent gain. But Ms. Edwards says annual fixes are "getting tougher and tougher, given the country's fiscal problems."

Still, she warns, if Congress and the administration fail to address the flawed formula in a meaningful way, many dermatologists may reconsider participating in the program.

Double whammy Medicare premiums also are on the rise.

Total Medicare outlays in 2004 grew 15 percent - 3 percent more than projected. To compensate for the shortfall, the Bush administration also announced a premium hike. Next year seniors will pay 14 percent more, or $89.20 per month. That comes on top of a 17 percent increase in 2005.

CMS administrator Mark McClellan, M.D., Ph.D., attributes adjustments to longer, more intensive doctor consultations; increases in minor medical procedures; and greater use of MRI scans and laboratory tests.

Medicare premiums are automatically deducted from Social Security checks. In 2000, recipients paid, on average, 5 percent of their Social Security income for Medicare. In 2006, the figure will climb to 13 percent.

Dr. Parsons estimates that Medicare patients currently comprise 30 percent to 50 percent of the average derm practice. As baby boomers move into middle age and beyond, that percentage should increase. Additionally, these seniors will have a higher incidence of skin cancer.