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Some Doctors Say They May Stop Seeing Medicare Patients After Cuts

By: Barbara Martinez
The Wall Street Journal, January 15, 2002

Every year, ophthalmologist Richard Mackool performs cataract surgery on almost 2,000 elderly people insured by Medicare, many of whom could not otherwise afford to have their sight restored.

The federal government this year is doing some surgery of its own -- on the physician fees charged by Dr. Mackool and the estimated more than 90% of U.S. doctors who treat Medicare patients. As of Jan. 1, Medicare cut reimbursements of these doctors' fees across the board by 5.4%. Doctors say the ones who will feel the pain are many of the more than 39 million seniors insured by Medicare.

For privately insured or uninsured patients, Dr. Mackool charges anywhere from $2,000 to $4,000, depending on complexity, to perform the cataract procedure, which involves removing the cataract and inserting a lens implant. To perform the same procedure on a Medicare patient last year, Medicare allowed him to charge only $855.82 -- reimbursed by Medicare at 80% and paid 20% by the patient. This year, with the reimbursement cuts and other adjustments to the formula, Dr. Mackool can charge Medicare patients just $768.52 -- a 10% decline.

With more than 80% of his patients on Medicare, the consequences for Dr. Mackool's practice are severe. Recently, he had to cut two of his 31 employees. Now, he says he is considering whether to refuse to participate in Medicare at all. "We've already done the numbers," Dr. Mackool says. "If I drop out of Medicare and I see a third of the patients I see now, our practice would actually come out better."

The cuts to physicians' fees underscore the strain that an aging population, rising demand for health care and new medical technology is placing on the system, created in 1965 to insure people over age 65. Medicare reimbursements of all kinds totaled more than $224 billion in 2000, up 51% since 1993. The economic slowdown has played a role in bringing about the 5.4% cut, because the formula Congress approved several years ago for calculating the physicians' fee is tied to changes in the gross domestic product.

As a result, doctors around the country are finding themselves pinched. "If you continue to lose and lose, there may be a time when we will have to limit services or close one of our sites," says Susan Turney, medical director of reimbursement at Marshfield Clinic, of Marshfield, Wis., which operates about 40 sites with 600 physicians. "In some areas of Wisconsin, we're the only provider," she adds.

The latest Medicare cut will cost the clinic $3 million in 2002, Dr. Turney says. Marshfield doctors who visit a hospital to care for a Medicare patient this year get reimbursed $62.96 for a standard visit, down 8.7% from $68.98 last year. Even doctors who don't see a lot of Medicare patients could feel the sting of the Medicare cuts: Many private health insurers use Medicare rates as a guide to set their own reimbursement rates.

In Birmingham, Ala., Cardiovascular Associates is weighing whether to pull back some of the free community services it offers, such as workshops in managing high cholesterol, as a result of the Medicare cuts. Jerry W. Chandler, a cardiologist and president of the practice, says bigger-picture consequences could include a decline in the supply of physicians. "We are disincentivizing people to go into medicine," Dr. Chandler says. In fact, medical-school applications already are down 26% over the past five years, according to the Association of American Medical Colleges.

In the 1990s, the government tried to control costs by moving some Medicare patients to health-maintenance organizations, but HMOs dropped them after the government tried to cut their reimbursements. This time, Medicare officials say they have no choice but to follow the formula Congress approved in 1997. "There is no wiggle room," says Tom Scully, administrator at the Centers for Medicare and Medicaid Services, the federal agency that runs Medicare.

Despite the cut in fees, the overall outlay by Medicare for physicians' fees is expected to rise 1% to $41.7 billion in 2002, the agency says. Coverage has been extended this year to several new preventive services, including annual glaucoma screenings for high-risk patients.

From 1998 to 2001, Medicare says, the doctor-fee formula set by Congress actually worked in physicians' favor, resulting in a cumulative 16% increase in physicians' fees for the period. The agency says physician payment rates in that period increased well above the inflation rate.

The American Medical Association, the doctors' trade group, fought fiercely to block the cut in physicians' Medicare fees. In all, the 2002 fee cuts amount to about $7 billion in lost payments to doctors, the AMA says. Looking back over 10 years, the AMA says, physicians' payments have risen only a cumulative 18.5%, or an average of 1.1% per year since 1991 -- far behind the skyrocketing rise in medical liability insurance and other physicians' costs.

"Physicians are getting to a point where they cannot afford to accept new Medicare patients," warns D. Ted Lewers, a board trustee of the AMA.

Of course, doctors have been threatening for years to drop out of Medicare because of insufficient payments, and a mass exodus isn't likely now. The Medicare population represents a huge chunk of the health-care market that few doctors can afford to ignore. "Doctors don't change very quickly, and in a sense, Medicare patients are very important to doctors' practices," says Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan policy-research organization in Washington.

Mr. Ginsburg predicts that some physicians will wait to see if some fees are restored in 2003 before deciding to cut Medicare patients. Meanwhile, the cuts are forcing doctors to make some hard decisions. "Physicians are really, really scrambling to figure out what kind of expense controls they can use," says Elizabeth Woodcock, director of knowledge management at Physicians Practice Inc., Glen Burnie, Md., who works with physicians to help make them more efficient. Ms. Woodcock says some physicians are trying to fit in more patients during the day, or are looking to see if they can rent space for less in another part of town.

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