Many doctors face another cut in Medicare reimbursements

Everything about running a medical practice has been getting more expensive, especially in the last few years — salaries are up, rent is up, equipment and office supplies are up. 

“At the same time, what Medicare has paid us has gone down,” said Bruce Scott, an ear, nose and throat doctor in Louisville, Kentucky, and president of the American Medical Association.

Adjusted for inflation, Medicare now pays doctors almost 30% less than it did in 2001, according to the AMA. And starting in January, the Medicare reimbursement rate for physicians will go down again by nearly 3% on average, the Centers for Medicare & Medicaid Services reported in its annual fee adjustment. That’s unless Congress intervenes, as it has in recent years. Meanwhile, the cost of practicing next year is projected to rise about 3.6%.

“As a result, physicians have made difficult choices,” Scott said. “In some cases, it’s to limit the number of Medicare patients that they’re willing to see, to stop accepting new Medicare patients or close their practice completely.”

It’s not because of just the decline in Medicare reimbursement rates, but how that decline ripples through the health care system. Private insurance companies tend to pay doctors significantly more than Medicare — about 143% more on average, according to the health policy nonprofit KFF. But the two are linked, so when Medicare rates go down, private insurance rates often do too. 

Mary Clarke, a family physician in Stillwater, Oklahoma, said all of this is having an impact on small, rural practices in particular, and on their patients.

“We see a lot of people having a hard time finding a physician who is accepting new Medicare patients,” she said. “I hear that from my staff on a weekly basis.”

She also hears it from colleagues around the country, particularly those in rural areas. Because private insurance does generally pay more, it’s critical for small, independent practices to have a mix of patients with different types of insurance. 

“You can’t see every Medicare patient. It’s not financially possible,” Clarke said. “You could not pay your staff, you could not pay your electricity, you could not pay your rent. You’re not bringing in enough money to do that.”

Nationally, people with Medicare report having just as good if not better access to doctors than people with commercial insurance, according to a recent report from the Medicare Payment Advisory Commission, or MedPAC, which advises Congress on Medicare. 

Michael Chernew, a professor of health policy at Harvard Medical School and chair of MedPAC, said that doesn’t mean people aren’t having issues finding doctors who take their insurance, or having to wait months for appointments — they are. It’s just not unique to Medicare.

“It can be hard to find doctors that take Medicare,” he said. “It can also be hard to find doctors that take commercial insurance.”

There are huge variations in how all of this is playing out around the country for big hospital systems versus private practices, and across specialties. Not all doctors are paid the same. 

“There are doctors who interpret images, there are doctors who do surgery, there are doctors who spend time in office visits,” said Robert Berenson, an Institute fellow in health care policy at the Urban Institute. 

There are thousands of different services that physicians provide, and Medicare and insurance pay some much more highly than others. 

“Have you ever had liquid nitrogen applied to a wart?” Berenson said. “It takes about a minute, maybe a minute and a half, generously, to apply the liquid nitrogen. The fee schedule pays $165 for that. And the payment for 40 minutes with a very complex patient who probably has one or more chronic conditions is about the same, $177.”

That is the primary problem with Medicare’s physician fee schedule, he said. “It results in overpayment for procedures and imaging and tests, and underpayment for time spent with patients.”

Even with the overall decline in rates, Berenson pointed out plenty of doctors are doing just fine. And big hospitals generally have leverage to negotiate higher rates for their doctors with insurance companies. 

But small practices, like Bruce Scott’s ear, nose and throat practice in Louisville, do not. 

“In my community, a single payer who controls over 60% of the private-payer market has actually offered us rates less than Medicare now,” he said. “We’ve been trying to negotiate with them, and we can’t even bring them to the table to talk because they know that we can’t really say no without harming many of our patients.”

But the decline in reimbursement rates is taking a financial toll. Earlier this year, a major cyberattack on the payment processing company Change Healthcare meant Scott’s practice didn’t have any revenue coming in for about six weeks.

“To give you an idea of the financial reality, our practice had to take out a loan to be able to pay our staff and pay our rent and all of our bills, and the physicians stopped taking paychecks for several pay periods,” he said. “That’s how close to the edge we are.”