Physicians Are Already Fleeing Medicare

Mitt Romney and Paul Ryan have made warnings about a lack of access to doctors a key part of their campaign against the president and his health care law. And last week, the health care economist John Goodman predicted in the Wall Street Journal that Obamacare will lead to a shortage of doctors throughout the health care system.

In a report for National Policy Analysis, however, David Hogberg presents evidence that an exodus of doctors from Medicare, the old-age social insurance program that is the largest purchaser of health care in the United States, isn't a future problem. It's already underway.

Hogberg cites evidence that 17 percent of physicians are restricting the number of Medicare patients they're seeing. He also provides anecdotes about physicians dropping out of Medicare to avoid its low fees and make ends meet. Most importantly, he looks at the trend lines for Medicare and sees that the prospects of cutting costs without losing doctors are not favorable.

As Hogberg notes, the fees Medicare pays for each service a doctor performs are centrally determined, and in large part influenced by an outside board of doctors. In 1997, Congress tried to cut Medicare costs by passing a law that instituted a formula, known as the Sustainable Growth Rate or SGR, that would lower fees paid to doctors to meet spending targets. The SGR has not been a success. Not only have its recommended cuts regularly been suspended by Congress (in a ritual known as the "Doc Fix") in the 10 years since it went in effect, it has nevertheless also led to doctors dropping Medicare patients because the program doesn't pay enough. 

Hogberg explains this paradoxical result:

The year 2001 was the first time that Medicare payments to physicians exceeded the SGR expenditure target, resulting in a 5.4 percent cut in physician fees in March 2002. Interest groups representing physicians did not take the cut lying down. Faced with another cut of 4.4 percent in March 2003, physician groups threatened to hit Congress where it would hurt the most. "Physicians cannot afford to treat Medicare patients under the new rates," said Dr. James C. Martin, president of the American Academy of Family Physicians.³⁶ The American Medical Association followed up with a survey in January 2003 showing that if another round of SGR cuts were to take place a significant number of physicians would restrict the number of Medicare patients they saw.³⁷ Apparently members of Congress were less than enthused by the prospect of a lot of senior voters struggling to find physicians who would treat them. Congress suspended the 4.4 percent cut and replaced it with a 1.6 percent increase.

For the next decade this kabuki dance would repeat itself. As the date that the SGR cuts would take effect drew close, physician groups would issue warnings about the number of physicians who would have to stop treating Medicare patients. Congress would suspend the cut and usually increase payment rates by one to two percent. This ended up increasing the difference between the SGR expenditure target and what Medicare was actually spending so that each subsequent proposed cut was larger than the last. By early 2012, Congress had to suspend an SGR cut of nearly 30 percent.

Even though Congress routinely suspended the SGR cuts since 2002, the SGR still had the effect of reducing Medicare payments to physicians. That's because the small one to two percent increases to Medicare's payment rates that Congress usually added when it suspended the SGR cuts were not enough to keep up with inflation. Factor in inflation and physicians were being paid less over a decade. Consider the reimbursement for a Level I visit with a new patient. In 2001, before the SGR took effect, Medicare paid $35.19 for that type of visit in the Austin, Texas area. By 2011, Medicare paid $40.80.³⁸ Yet if reimbursement rates had grown at the rate of inflation during that time, Medicare would have paid $45.08. In effect, physicians in Austin experienced a 10.5 percent reduction in their Medicare rates for that service.

So while the SGR failed to meet its spending-reduction goals, it did have the effect of limiting Medicare recipients' access to doctors. Congress doesn't have the political power to bend the phyisicians' groups and other lobbies to its will and force them to accept lower fees. Yet it can, and already has, rigged the system to make it hard for physicians to see Medicare patients.