Medicare: The Hottest Topic in Healthcare Reform

Throughout the health care reform debate, one federal program has played a starring role: Medicare. From the multitude of acronyms which have sprouted to describe new methods of medical care compensation (PQRI, ACOs, EOCs, VBP) to the perennially problematic SGR, Medicare is the primary laboratory for experimentation in cost control techniques. As emergency care providers, we are obligated to understand how Medicare works so we can continue to provide the highest quality care while maintaining fair compensation for our profession.

How big is Medicare?
Medicare is a federally-funded program which pays for the health insurance of 47 million individuals in the United States—39 million people age 65 and over and 8 million younger people with permanent disabilities. It covers both inpatient and outpatient services and was expanded to include prescription drug coverage in 2003. Medicare benefit payments will cost the federal government 504 billion dollars and constitute 12 percent of all federal spending in 2010. The expense of this massive program has become a significant concern for the federal government as annual deficits and the federal debt grow. Due to their high rates of voter participation and the effective lobbying efforts of organizations like the AARP, seniors have historically been able to protect the program from any significant cuts. According to the latest CDC statistics, 17.2 percent of emergency department visits nationwide are paid for by Medicare.

Is health care reform gutting Medicare to expand health coverage to the uninsured?
Over the first ten years since the passage of the Patient Protection and Affordable Care Act (PPACA), the Congressional Budget Office projects that a net savings of 428 billion dollars will occur through cuts to Medicare. The most significant change in spending is the reduction in payments to Medicare Advantage Plans. The Medicare Advantage program—also known as “Part C”—allows beneficiaries to enroll in privately run health insurance plans such as HMOs and PPOs, instead of traditional fee-for-service Medicare. While Part C was initially expected to slow health care cost growth through the use of managed care, the government currently pays 13 percent more for beneficiaries enrolled in Medicare Advantage plans than those covered by traditional Medicare. Under health care reform, payments to Medicare Advantage plans will be reduced so that Medicare no longer pays more for beneficiaries enrolled in Medicare Advantage. This change is projected to save 136 billion dollars over 10 years without substantially reducing the benefits provided to Medicare enrollees. PPACA is projected to save millions more by decreasing payments to non-physician providers and establishing a variety of new programs intended to increase quality while decreasing costs. The formula currently used for calculating physician payments, the sustainable growth rate (SGR), was not modified by the PPACA.

What is the IPAB?
The Independent Payment Advisory Board (IPAB) is one of the most controversial elements of PPACA. The IPAB is a 15 member board, appointed by the President and confirmed by the Senate, that will be tasked with developing coverage decisions to reduce Medicare spending if projected spending exceeds targeted growth rates. The Secretary of Health and Human Services is required to implement the Board’s recommendations unless Congress has already passed alternative legislation projected to achieve the same level of savings. Implementation of IPAB recommendations would not be subject to the approval of any elected body. The Board is not allowed to submit policies which would ration care, increase taxes, change Medicare benefits or eligibility, or increase beneficiary premiums and cost-sharing requirements.

With this long list of restrictions, the only remaining option to allow IPAB to cut costs is to reduce Medicare provider payment rates. These cuts are projected to save 16 billion dollars over 10 years. Providers, including physicians, are concerned about the exclusive focus of the IPAB on cutting provider payments, but it is possible the IPAB will be eliminated before it is fully formed. One of the lawsuits challenging the constitutionality of the PPACA in Arizona questions whether the IPAB can be legally allowed to change Medicare payments without the approval of Congress. In addition, a group of Republican Senators has already introduced a bill, the “Health Care Bureaucrats Elimination Act,” which would repeal the IPAB. The odds of successful passage of such legislation significantly increased after the midterm elections brought a Republican majority to the House of Representatives and increased Republican representation in the Senate.

What is the SGR?
The SGR is one component of a complex formula created by Congress to determine reimbursement rates for physician services provided under Medicare. It was passed as part of the Balanced Budget Act in 1997. The goal of the SGR is to prevent spending on physician’s services to grow any faster than the per capita growth in gross national product (GNP) and thus to keep Medicare growth within America’s ability to pay. For the first few years, spending stayed within these limits and physicians experienced small increases in payment rates. Since 2003, the SGR has dictated a cut in reimbursements to physicians since healthcare costs have risen faster than GNP, and Congress has acted to avert this cut by passing legislation to either freeze or slightly increase rates each year.

Congress has never permanently changed the underlying formula for calculating reimbursement, so the need for a “doc fix” is a recurrent debate in Congress. The latest fix will last through January 1, 2012 and represents the fifth time Congress has acted to avert the cuts in the past year. Unless a permanent solution is reached, a 40 percent reduction in physician reimbursement will be scheduled for 2014. Physicians hope that legislators will use the time provided in 2011 to develop a permanent replacement to the flawed SGR system. Replacing the system, however, will be very expensive and a bipartisan agreement on an appropriate replacement may be difficult to achieve.

Want to learn more?
Mark your calendar for ACEP’s Leadership and Advocacy Conference in Washington D.C., May 22-25, 2011. Seek out sponsorship for travel expenses from your residency program or state chapter as part of EMRA’s 7th Annual Chair’s Challenge! The second edition of EMRA’s Advocacy Handbook will be released at the conference. The new edition will include many details about the Medicare programs and much more.

Also consider joining EMRA’s Health Policy Committee and enrolling in ACEP’s 9-1-1 Advocacy and Legislative Network.  Further information about all of these opportunities is available at

Recommended reading and references include Medicare: A Primer by the Kaiser Family Foundation and Health Policy Brief Series by Health Affairs and the Robert Wood Johnson Foundation.

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