MEDICARE CRISIS NOW ON THE CLOCK DURING THE LAME DUCK CONGRESS

Now that the “lame duck” Congress is getting underway, the countdown toward a potential Medicare crisis has officially started. As I discussed last week, Congress has until December 1st to address the planned Medicare physician pay cut. If they adjourn without resolving this issue, then 2011 may start with a major Medicare crisis if a significant number of physicians opt out of Medicare.

This Medicare crisis would primarily result from a dramatic reduction in access to care for seniors created by a decrease in the number of participating providers. If the issue is not addressed, however, it has even greater potential to spread beyond Medicare to cause a major systemic healthcare crisis.

As I noted in my recent posts, Congressional inaction would result in a combined 28.5% reimbursement reduction on January 1, 2011. From a business standpoint, medical practices may be forced to accept the difficult conclusion that they can no longer participate in Medicare. Even after opting out of Medicare, however, physician practices will still face additional financial crises due to the domino effect produced by the dramatic reduction in Medicare reimbursement.

Although the Medicare reduction will be the headline, this reduction will have a ripple effect that spreads through the reimbursements from several other healthcare coverage sources. The reduction in Medicare will produce an immediate equal reduction in TRICARE reimbursement – the healthcare insurance for military personnel and their families – since TRICARE payments are directly tied to Medicare rates.

This reduction will also extend beyond the government-sponsored healthcare coverage and will be reflected in the private health insurance market. Despite the public perception that government healthcare and private health insurance are unrelated entities, the fact is that most private health insurance companies base their provider reimbursement rates on Medicare. This is not a supposition or fabrication; instead, it is a legal fact that is formally documented in the provider contracts with these insurance companies. These contracts typically specify provider reimbursement as a multiple of the Medicare allowable charges.

It also needs to be pointed out that these reductions are occurring at a time when medical practices in many states have already experienced Medicaid reductions of 10% or more. As the government stimulus money for Medicaid runs out, many states are already discussing future Medicaid provider payment reductions.

The Medicare reductions, therefore, not only affect Medicare patients, but could also have implications for almost the entire healthcare marketplace. A failure to address this problem will quite possibly have repercussions that start as a Medicare crisis but compound into a general systemic healthcare crisis for the entire country.

One would think that the issue of the Medicare physician pay cut, therefore, would be a significant topic of concern for this upcoming Congressional session. Other than an Associated Press article published on the topic this weekend, it does not appear to be garnering any significant coverage in the mainstream media. Perhaps there is general “healthcare burn-out” after the debate over the healthcare reform bill and the recent elections; hopefully, the “lame duck” Congress realizes the stakes. It is now up to Congress to demonstrate some leadership and take action to avoid a Medicare crisis as they are now “on the clock” starting today.