Issue 1, Number 3 - Fall/Winter 2011

Foundation Editorial: Tilting at Medicare

By Ted Mazer, MD

As physicians, advocacy in medicine is an underpinning of our ethics. We practice advocacy every day in our work with and for patients, but that work is unduly influenced in American medical practice today. I have long felt that in order for us as individual doctors and for our organizations such as Pacific Foundation for Medical Care and California Medical Association to serve our patients and colleagues best, we as practitioners of healing arts must also be advocates in the regulatory and legislative arenas that so impact what we do in the office, hospital, and operating room daily.

Often times I feel like Don Quixote tilting at too many firmly anchored windmills in the forms of health plan demands and paperwork, state and federal regulations, unfair payment rules in the public and private sectors, and the list goes on. But then I remember that without such efforts by those who elect to take on these battles, the state of medical practice and medical care in California and the nation would be magnitudes worse than it already has become. It may not seem so at times, but despite all the obstacles, we really do make inroads and positive impacts in the legislative, regulatory, and sometimes legal theaters. So I continue taking up my lance (outside my practice, thank you) and try to right a few of the wrongs we all work under every day.

So it is that I find myself now in two such battles: One is fighting California Medicaid (Medi-Cal) cuts which impact access to care, particularly specialty services, and force doctors who may want to participate in needed safety net health care provision to walk away or severely restrict their participation. The state has proposed provider reimbursement cuts to balance its budget and try to meet promises to the poor, which the state never properly funded. Yet such cuts completely fail to comport with federal requirements that mandate reimbursement levels adequate to maintain access to care for Medicaid beneficiaries at levels equal to access for the general population in those regions.

The second battle is trying to force Medicare geographic payments, long known to be calculated under severely flawed geographic practice cost index (GPCI) and locality formulas, to be updated and to comply with Congressionally-mandated payment accuracy requirements, the lack of which is driving physicians to close their practices to new or all Medicare patients.

The Medicaid issue is already before the U.S. Supreme Court, but in the last few weeks, the Centers for Medicare and Medicaid Services (CMS) has granted an unsupportable waiver to California to make cuts to provider payments, even retroactively, despite failure to comport with access and payment regulations which CMS is supposed to enforce. My guess is that yet another court action will be filed shortly, this time against the federal government, to block these cuts, and Dr. Quixote will be back in action once again. Unfortunately, when the Congress and the agencies empowered to enforce regulations fail to fulfill their duties, we must look to the courts to try and resolve the issues.

Regarding the over-a-decade old Medicare geographic payment battle, efforts to work out corrections and proper updates to reflect accurate geographic payment throughout California and indeed the country have wended their way through meetings, regulatory and rule making processes, and multiple legislative cycles, getting ever so close to resolving the flaws inherent in grouping high and low cost counties together using old cost data and failing to apply updates as cost variations grew over the years. Unfortunately, resolution to such problems often depends not only on the facts, but even more upon the politics and financial landscape through which such resolutions must ride. And in the end, when all else fails, the courts become the inevitable, if highly imperfect, mechanism to which we must turn to fix what is seriously broken. Thus it is that I find myself, on behalf of approximately 50,000 physicians nationwide, as a plaintiff against the U.S. Department of Health and Human Services (DHHS) for corrective action in creating an accurate prospective payment formula that properly recognizes geographic differences in the cost to render medical care. The suit also seeks retroactive damages for the decade of underpayments that have gone unaddressed despite years of efforts to correct these inaccuracies.

If you are reading this as a physician or other health care provider in Sonoma County—or San Diego County, where I practice and live—you are undoubtedly all too well acquainted with the long overdue need to overhaul this system. If you are a purchaser of health insurance—which all of us are in one way or another—this also affects you because Medicare rates are the basis of how your physician is paid to provide your medical care, whether you are a Medicare patient or you are insured through a private plan that utilizes a preferred provider organization (PPO) or health maintenance organization (HMO).

In virtually all of counties where PFMC members practice, the Foundation has negotiated with insurers to secure consistently higher reimbursement rates for network physicians to support financial viability of their practices as a benefit of membership. But because for so long the basic Medicare rates have borne little relationship to the actual and dramatically rising costs of practicing medicine in many areas of California, the financial solvency of most physicians has continued to erode, and patient access is beginning to suffer. In some areas of California, a new Medicare patient cannot find a doctor willing to accept them. In my local area, orthopedists are leaving the Medicare program, and we just lost one of the best general surgeons in town to the Navy hospital because under current Medicare fee schedule payments used by other payers, his 24-year practice was financially unable to continue. Attracting new physicians to high cost-low pay communities is difficult and portends further erosion of access to care as California’s physician population continues to age and retire.

How did we get here? During the 1990s, Medicare divided the nation’s physicians into 89 geographic payment zones and set payment rates by calculating variances in the cost of providing care and doing business in the different zones and based on whether areas are deemed urban or rural. Some areas of California, among them Sonoma and San Diego counties, were designated as part of a rural, catchall region known as Area 99 and therefore reimbursed at lower rates. How these reimbursements are calculated has long been a subject of dispute. Changing demographics over the past 15 years have also made the geographically-based system even further outdated to the point that Medicare reimbursements in some 200 counties nationwide, including 14 in California, have not reflected physicians’ real costs for many years.

Many studies, even some commissioned by Medicare, have been done and have confirmed the failure of the current locality system to properly reflect accuracy of payment as required by Medicare regulations. Buried in the Affordable Care Act passed in March 2010 was a requirement for the federal government to conduct yet another study about this issue. In June 2011, the Institute of Medicine first issued its findings in a report called “Geographic Adjustment in Medicare Payment, Phase I: Improving Accuracy.” A more recently released second report made news by expanding on the earlier report with more specific recommendations for improving how Medicare calculates the costs of practicing medicine in various geographic areas. In short, the IOM report makes the same conclusions and essentially the same recommendations that California physicians have championed all along.

In the early 2000s, the California Medical Association got involved in efforts to “fix” this growing disparity by engaging CMS in a dialog about this problem, seeking to correct and update the formulas and localities while mitigating any negative impacts that might accrue to counties that have been wrongly coupled with more expensive counties for the many years during which cost disparities grew. What followed is a long and elaborately complicated history of attempts to negotiate with a disjointed, resistant federal bureaucracy and to navigate the legislative cycle in Congress with its shifting political winds. We have come close several times to resolving the entire issue, only to have “Lucy” (read here: the U.S. Senate) pull the football away just as it was about to be launched into the air. From early discussions on this issue in Santa Cruz around 2000, to a meeting between CMA, HCFA (the predecessor to CMS) and others in 2001, through today, these efforts have resulted in frustrating failures.

Ultimately this led to six California counties filing a $3.5 billion (and growing) federal class action lawsuit against DHHS in 2007. I am one of several physicians who have worked on this cause since 2001. I became one of the plaintiffs in this suit to ensure that the suit would be eligible for certification for nationwide class action.

The exciting news is that as a result of ongoing legal representation and the IOM reports—and likely due to recognition by CMS and others that this problem is not going away—we are finally making headway. Following the IOM’s first report this past summer, the defendants requested (perhaps coincidentally) that we attempt to move this from further trial preparations to settlement negotiations. The first of these meetings just recently occurred. We will continue to press our cause to resolve and update the geographic payment formulas as rapidly as possible, moving to greatly improved payment accuracies and hopefully administrative long term simplification, while also being sensitive to mitigating, where possible, the impact on other counties not part of the class action suit.

We still have a long way to go. Getting prospective relief will require more than demands, but should be achievable. Rule making and other political issues need to be addressed. Retrospective damages continue to accrue and will need to be addressed as well. But resolving the lawsuit may finally bring more accurate and fairer Medicare payments to physicians and other providers in heretofore underpaid counties such as Sonoma and San Diego.

Equally as important, by having a direct impact on future Medicare payments and any future contract payments that are based on Medicare fee schedules, this settlement will also keep more PFMC physician practices viable, and maintain and improve patient access to care throughout California and perhaps the nation as a whole.

And that’s a windmill worth tilting at, even when it never seems to budge.

Ted Mazer, MD
Past PFMC Board President
Former PFMC Board Member
Vice Speaker, California Medical Association