Medicare will charge patients more and pay doctors less in 2006, a monetary blow that has both parties feeling like they're getting the short end of the stethoscope.
And each side is aware that things could get even worse; the extent of the increases and reductions is still not known.
America's seniors, who were told through a Medicare trustees report two weeks ago that their monthly Medicare Part B premiums would rise from $78.20 to $87.70, received news last week that those premiums are expected to leap even higher in 2006-as much as $89.20 per month. The rise, the CMS said, is attributed to recent payment increases to doctors.
The CMS also told the Medicare Payment Advisory Commission that doctors should expect a 4.3% cut in reimbursements next year, even as surveys by the American Medical Association say the cost of providing care to Medicare patients has risen dramatically in recent years.
Accounting for the updates, the CMS said it adjusted the premiums because of a growth spurt in physician visits and outpatient care, explaining that the agency expected significant growth and got even more growth than it bargained for. Medicare spending on doctor visits and services rose by about 15% last year, the CMS reported.
"This is a big increase in expenditures, and we are looking into this closely to find out exactly why these costs are going up," CMS Administrator Mark McClellan told reporters during a conference call last week.
What the medical community learned is that it's not the number of patients that is causing Medicare spending to grow so rapidly. It's more and longer office visits by those patients, along with higher use of services such as laboratory tests and mammograms.
Numbers from 2004 are still coming in.
"This was just the first drill-down; we will continue to look at costs as information comes in," said Herb Kuhn, director of the Center for Medicare Management. "These are extraordinary circumstances. We don't expect to have concrete numbers until late summer or fall."
The road to premium increases or payment reductions is formulated by law, Kuhn said. The CMS must take the numbers and put them into a set formula, and what comes out are the increases or reductions.
The CMS plans to look at services and procedures performed by doctors to determine which are getting the best outcomes, McClellan said.
Physicians didn't exactly take that missive as a pat on the back though.
"They seem to be saying, `Gee, volume has gone up-doctors must be doing something to make more money,' " James Rohack, chairman of the board for the American Medical Association, said in a news release last week. "The reality is that doctors, based on science, are providing appropriate medical care, plus they're providing those screening tests that Congress has mandated to be covered by Medicare."
Kuhn noted that Congress could intervene to modify physician payments, which increased by 1.5% in 2004 and 2005.
"We plan to sit down with physicians and discuss policy to deal with this rather serious situation," he said. "We also have real concerns about seniors. This is weighing heavily on them."
True, said John Rother, policy director for the AARP. Double-digit increases in Medicare premiums over the past three years have taken bigger and bigger chunks out of seniors' Social Security checks, which have seen only 2% to 3% cost-of-living adjustments, he pointed out.
CMS officials have repeatedly said Medicare premium increases will be offset by the new prescription drug coverage. But Rother calls that a "one-time event for many patients."
"We're looking at the big picture, and it's not a pretty picture," he said.
Physicians have threatened to stop accepting Medicare patients, as they point to cumulative potential payment cuts of approximately 26% from Jan. 1, 2006, through the end of 2011.
"At the same time the costs of running a practice and caring for patients will go up 15%," said J. Edward Hill, president-elect of the AMA.
"Unfortunately, if the flawed formula is not replaced, physicians may have to make hard choices about treating new Medicare patients."
Hill and the AMA reacted to the trustees' annual report by telling Congress and the Bush administration to replace a "flawed and permanently broken physician payment formula."
After the CMS' update, Senate Finance Committee Chairman Chuck Grassley (R-Iowa) released a statement saying, "The data presented illustrate a significant increase in Medicare expenditures for physician services. ... It'll be important to understand which services contribute to health improvements and which are more questionable. To that end, physicians and other interested parties should be included in these discussions."
Rep. John Dingell, the ranking Democrat on the House Energy and Commerce Committee, responded by saying that if things aren't fixed, the doctor-patient relationship will "go the way of the dodo bird."
Meanwhile, hospital groups seemed neutral on the issues. "The rise in Part B premium is not related to inpatient hospital-care services," said Richard Pollack, executive vice president of the American Hospital Association. "It's reflective of increased patient-care services that are being provided primarily by physicians."