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FIRST MAJOR HEALTHCARE CRISIS FOR THE NEW CONGRESS IS HERE November 8, 2010

Now that the election hype has started to subside and the pundits have weighed in on the results, the time to address the healthcare challenges of the country is approaching far more quickly than the politicians seem to be aware of. While many promises were made regarding the direction of healthcare for the next Congress, the upcoming “lame duck” session may predetermine the course of those plans. The post-election discussion has primarily focused on the Bush tax cuts and the budget, but there is a significant deadline approaching that has the potential to produce a major healthcare crisis before the new Congress is even sworn in. The deadline is December 1st, when the previous temporary Medicare physician payment “fix” is set to expire.

This deadline may not seem like a significant event, particularly since it appears to be flying under the radar of the media and the politicians’ talking points, but the potential repercussions if the “lame duck” Congress fails to act may be massive. The expiration of the previous “fix” is occurring during a time when events seen to be aligning to produce a “perfect storm” to create a severe Medicare crisis starting January 1st. Dr. Cecil Wilson, president of the AMA, describes the potential outcome as “catastrophic”.

This “perfect storm” is the byproduct of a bipartisan effort, as both Democratic and Republican Congresses have practiced the classic Washington tactic of “kicking the can down the road”. They have been passing “temporary fixes” to physician Medicare payments since 2003 but have never bothered to permanently fix the cause. Their procrastination in addressing this problem has now led to this confluence of events, with the healthcare of U.S. seniors hanging in the balance. Ironically, after all of the recent election cycle rhetoric regarding healthcare, this potential Medicare crisis has nothing to do with the healthcare reform law passed earlier this year.

There are multiple contributors to this potential tempest. The primary force is the Medicare physician pay cut that results from application of the sustainable growth rate formula used to determine Medicare reimbursement. The impact of this primary force was delayed when the “temporary fix” was passed this summer, but this will expire on December 1st. Once it expires, Medicare providers will immediately experience a 23.6% cut in Medicare reimbursement. While this “temporary fix” may have worked politically, this delay will result in exponentially greater damage if the pay cut goes into effect in December. This is because the full force of this pay cut will be further magnified when an additional 6.5% reduction occurs on January 1, 2011.

There are also additional forces contributing to this storm from the provider standpoint. For many providers, the Medicare pay cuts represent additional reductions in reimbursement on top of Medicaid cuts of 10% or more in the last year, with further reductions still possible. There is also the December 31st, 2010 deadline looming for physicians to decide on their Medicare participation status for 2011 (a decision that is binding throughout 2011).

Combine these forces with a “lame duck” Congress and the Democratic Party’s defeat in the recent elections, and the stage is set for a potentially cataclysmic healthcare crisis. If the political parties decide to play a “game of chicken” during the upcoming session, and neither party blinks (or “compromises”, to use the current political ‘word of the day’), then their failure to act may unleash a cascade of events that creates a massive Medicare crisis to start the new year.

Medicare participating providers will be forced to make a decision on participation status for 2011 with a combined 28.5% reimbursement reduction in place. This will be a very difficult choice as providers try to determine the effect that Medicare participation will have on their practice from a business standpoint; many may have to opt out of Medicare in order to keep their practices in business. I realize that this statement may seem over-the-top, but a recent MGMA survey is consistent with this reality. The recent MGMA survey revealed that if the pending cuts take place, then 49.5% of surveyed physician practices plan to stop accepting new Medicare patients, and 27.5% say they will stop seeing all Medicare patients.

The repercussions of this “perfect storm” would create a healthcare crisis that would make the recent healthcare debate appear temperate. There are already issues with provider access for Medicare patients in many areas. If a marked reduction in Medicare providers were to occur, just as even larger numbers of baby boomers are becoming Medicare-eligible, it is possible that such a dramatic limitation in access to medical care could undermine the very framework of the Medicare system itself.

Clearly, our elected officials in Washington are facing an issue that demands bipartisan action to avoid a major crisis. The straightforward solution is to pass another temporary fix and “kick the can down the road” again. This seems like a very reasonable option, but unfortunately, given the bitter partisanship in Washington, Congress’ recent track record suggests that even the simple and reasonable can be impossible. This fact was demonstrated earlier in the year when they failed to pass the current temporary fix by the June 1st deadline and the cuts were in effect until this recent fix was passed in July.

The clock is therefore ticking on Congress to take action during this “lame duck” session. If time runs out, the new Congress may take office in January 2011 in the middle of a massive Medicare meltdown.

I realize that this post has a political theme that is out of character with my usual posts. This topic, however, does have a direct impact on the initiatives for the adaptation of electronic health records/electronic medical records. Changes in Medicare reimbursement have a direct effect on the EHR incentive program, and I will discuss these repercussions in my next post.