American College of Physicians: Internal Medicine — Doctors for Adults ®

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Diagnosing—and curing—Medicare's maladies

From the March ACP-ASIM Observer, copyright © 2002 by the American College of Physicians-American Society of Internal Medicine.

By Robert B. Doherty

Of all the federal health programs enacted over the past 40 years, Medicare has endured as the one program that continues to enjoy tremendous bipartisan support in Congress, backed by the votes of millions of elderly and disabled patients nationwide.

Why has Medicare succeeded when so many other programs have failed? One reason is that from the beginning, Medicare was open to all elderly and disabled patients, not just those who fall below a certain income level. This has always given the program a wide base of popular support.

Medicare's popularity is also grounded in the freedom of choice that it gives beneficiaries. Medicare allows eligible patients to obtain services from just about any physician who wants to see them. By contrast, most private insurers limit enrollees' choice of physician to an approved panel.

Because Medicare enjoys more support from both the public and legislators than any other federal health program, it seems a given that politicians would avoid tinkering with it in an election year. Congress and the White House, however, are doing just that as they discuss substantial changes to Medicare's benefits and cost-sharing—and the government's role in the program.

The interest in reforming Medicare comes from a simple reality: As good as the program has been, underlying maladies threaten its long-term health. Inadequate reimbursement for covered services, excessive bureaucracy and outdated benefits are all becoming increasingly apparent.

Because ACP-ASIM represents the specialty that treats more Medicare patients than any other physician group, we are taking a lead role in proposing reforms that address each of Medicare's maladies. Here is a review of the issues and our positions.

Inadequate, unstable reimbursement

Historically, Medicare payment levels for covered services have been high enough to draw most physicians into participating in the program. Now, however, physicians and other providers are waking up to the news that for the next three or four years, Medicare payments will likely continue falling farther behind the costs of providing patient care.

In addition to the 5.4% physician payment cut physicians are facing this year, there are indications that payments could be cut another 5% in 2003 and again in 2004. Payments to teaching hospitals and other providers could also be similarly reduced.

By breaking Medicare's promise to ensure stable and predictable payments that will increase with the cost of providing services, Congress risks driving physicians and other providers away from the program.

ACP-ASIM is urging Congress to ensure that reimbursement for existing benefits is adequate and predictable. The first step is to halt the 5.4% cut in physician payments.

We are also urging Congress to replace the current formula used to calculate physician reimbursement. The government should instead use a framework that ensures payments will predictably increase with the costs of delivering care.

Excessive government mandates

Medicare red tape and government mandates are another threat to the program's continued success.

Over the past 20 years, Medicare's administrative agency and regional carriers have demanded more and more documentation from physicians before paying for services. Physicians are expected to know more than 100,000 pages of rules that are so complex that the government's own contractors often cannot correctly advise physicians how to accurately bill for a covered service.

As a result, physicians must spend more money to comply with unfunded government mandates while their Medicare reimbursements are slashed. Should anyone be surprised that physicians feel they must reassess their willingness to continue participating in the program?

The College believes that Medicare's continued viability depends on the ability of Congress and the Centers for Medicare and Medicaid Services (CMS) to reassess the regulatory burdens imposed on physicians and other providers. The House of Representatives unanimously passed a Medicare regulatory relief bill last year, but the Senate has not yet acted upon it.

Enacting this bill would mark an important shift. Instead of trying to control Medicare costs by demanding more paperwork from physicians, the program would use an approach that emphasizes education and collaboration as the best way to achieve savings and ensure quality. In the absence of congressional action, the Bush administration, to its credit, has begun identifying excessive Medicare regulations that need to be eliminated or modified.

Inadequate benefits

When Medicare was enacted in 1965, little was known about the benefits of preventive services and screening procedures. In addition, far fewer drugs were available to treat the medical problems that elderly patients typically experience.

Consequently, Congress decided that Medicare should pay for only medical and surgical services to diagnose and treat symptomatic patients. Excluded were routine preventive and screening tests, physical exams and medications.

Today, there is almost universal agreement that Congress needs to modernize Medicare benefits to include lifesaving preventive services and medications. Congress has begun adding selected cancer screening tests, but typically in response to well-organized lobbying campaigns by device manufacturers, medical specialists and patient groups that merely sought coverage for a particular procedure. The problem with this piecemeal approach is that Congress is making decisions about preventive benefits based principally on lobbying clout, not medical evidence and expert opinion.

As an alternative, ACP-ASIM is urging Congress to enact legislation to create an ongoing process for adding preventive and screening services to Medicare's benefits package. This process, however, must be based on an independent evaluation of the evidence of a procedure's effectiveness.

Finally, the College agrees that Medicare should cover prescription drugs. The problem is that Congress might be inclined to add such coverage without guaranteeing sufficient, sustainable financing to cover the costs.

Diverting funds from existing covered physician services to pay for a new drug benefit would only exacerbate the problem of inadequate payment for physicians. We have suggested that if adequate financing can't be assured, Congress should begin by making drug coverage available to lower-income beneficiaries.

Medicare's uncertain future

Can Congress find the money to ensure adequate, predictable payments for current benefits while expanding Medicare coverage to include lifesaving preventive services and medications at the same time? Some in Congress and the administration say the answer is "no" and urge choosing between adding popular new benefits or halting cuts in provider payments.

The College, however, believes that Medicare's future success requires Congress to do both. Adding new benefits when payments don't cover the costs of existing ones is a recipe for failure. It is like putting a costly addition on a house that has a crumbling foundation.

Congress needs to strengthen Medicare's foundation by halting payment cuts, replacing the flawed formula for updating payments and reducing the excessive red tape that drives physicians away from the program. Only then does it make sense to add new benefits, no matter how popular such benefits may be with voters.

Robert B. Doherty is ACP-ASIM's Senior Vice President for Governmental Affairs and Public Policy.

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