Rising Medicaid, Medicare costs could close doors

Vermont Business Magazine, Dec 01, 2006 by Barna, Ed

In health care, the problem isn't passing the buck, it's passing around the lack of bucks.

Voter-conscious and deficit-burdened politicians, budgetminded hospital administrators, doctors struggling to maintain independent practices and families trying to pay rising costs for fuel and insurance (like all of those previously mentioned) have to set limits of some sort. The one place where limits don't apply is the emergency room, to which many of those affected by those limits go as a last resort, with problems so serious that they cost far more than regular care, forcing price increases that set in motion the whole cycle again.

Vermont hasn't seen patient dumping yet, the most serious sign that something isn't working. In larger, more urban states where for-profit hospitals are more common, reports have come of indigent patients with severe health issues appearing on some other municipality's Desolation Row. No one knows the true dimensions of this kind of literal cost-shifting, but some in the field have called It, in national press reports, "common.' "

No one wants to call it "rationing," but those in Vermont who watch the effects of policies regarding Medicaid (which depends heavily on the state budget) and Medicare (a federal province) are increasingly concerned, because low levels of reimbursement in those two programs have the potential of interacting with other problems of rural health care systems. Call it anticipatory pre-rationing: if a county finds it hard to recruit enough family practice (eg, gateway) physicians, if doctors get frustrated and retire sooner than they might, or if practices reaches the limits of human effort and say they cannot take on any more patients, the difference between that and turning away Medicaid and Medicare patients is more verbal than real. And to the degree that physician practices struggle to pay regular bills, they are less likely to invest in medical equipment or improved record-keeping systems, both of which can affect services deliverable or delivered even when it is possible to arrange an initial examination.

Dr Paul Harrington, president of the Vermont Medical Society, is among those who are highly concerned. The VMS in November sent out a warning that unless Congress acts quickly to change a planned reduction in Medicare payments, the state's 80,000 Medicare-dependent seniors will see their medical access threatened.

The current Medicare reimbursement rate for physicians is the same as it was five years ago, the VMS observed, yet real estate rental or maintenance, liability and other insurance, medical and other supplies, personnel expenses, and other costs have steadily risen - about 20 percent in those five years, by the numbers they are using. On top of that effective decline in reimbursement, Vermont physicians will face two direct cuts starting in 2007: the expiration of a 1.68 percent geographic equity adjustment program that began in 2003, and a 5 percent across-the-board cut from the physician payment formula.

Putting it all together, the VMS found that "As a result of these across-the-board cuts and the changes in payment for different procedures, more than half of Vermont's physicians would be hit with cutbacks ranging from 6 percent to 20 percent, depending on their specialty." But even this did not truly describe how hard the cuts would hit, because "many independent Vermont doctors are already struggling to keep their practices open."

Interviewed, Harrington said the Med-Med situation is a significant factor behind a phenomenon many people have become aware of in reading bills from their family doctors: the area hospital actually owns the practice. Getting a salary and practicing medicine, rather than worrying about bills for electricity and rent and insurance and trying to collect bills from people worried about electricity and rent and insurance, and so on, has proved an attractive alternative for professionals whose original, motivating interest was helping others through the practice of medicine. About half of the state's physician practices are now under such hospital umbrellas, he said.

And what happens when Med-Med payments don't cover the hospital's expenses? Ron Hallman, head of communications for the, Porter Medical Center in Middlebury, said they have to cover the shortfalls with other money from the hospital side of the ledger.

Then people with health insurance begin getting bills for more than their expected copayments, because the charges are greater than the customary and allowable amounts - cost shifting. Newspaper headlines talk about percentage rises in insurance premiums, but these can be misleading. As in the A, B and C system of buying mutual fund shares, in which those with A shares pay more at the start and B and C shares have fees that come in later, insurance policies can be more or less adequate in paying for what they supposedly cover.

But such situations are less likely to get national attention than the upcoming Med-Med effects. "Surveys have shown that if these Medicare cuts are allowed to go into effect, about half of physicians nationwide say they will be forced to decrease the number of Medicare patients they care for or stop seeing new Medicare patients altogether," said Harrington. "This will have a devastating impact in Vermont, where we have one of the oldest populations in the country and the number of senior citizens is continuing to increase rapidly."