Price-fixing, the bluntest of economic policy instruments, is enjoying a resurgence among health care policymakers at the national and state levels. In California, Medi-Cal reimbursement rates for physicians have been cut 5%, effective the first of this year. The cut is expected to save the state some $65 million while in effect (it is slated to expire at the end of the fiscal year).
California’s action was initiated under former Gov. Gray Davis (D), but the cut was suspended until approved through the legal appeals process. The cuts do not affect facilities, pharmacies, or other ancillary providers.
Reimbursement cuts may lead to more physicians refusing Medi-Cal; today about half of the state’s docs don’t accept the state program and about 2/3 of surgeons have opted out as well. One pediatrician noted that he gets about $26 for an office visit, and $13 pmpm for those kids on capitation.
Notably, Gov Schwarzenegger has declined to reduce benefits or cut eligibility; that willingness to hold the line, coupled with the rising costs of Medi-Cal which now accounts for 15% of the state budget, led to the reimbursement reduction.
Meanwhile, Congress has yet to resolve the 4.4% reduction in Medicare physician reimbursement scheduled to go into effect 1/1/2006. While both the House and Senate have agreed to rescind the cuts, the implementing legislation is stuck in a procedural process (the Senate’s version and the House’s differ, so a conference committee is working on resolving the differences). It appears likely that the cuts will be reversed.
The AMA and other physician groups note that the cuts go into effect simultaneously with implementation of the new Part D prescription drug program. The result, according to some, is physicians will be inundated with questions from concerned patients at the same time they are getting paid less money to see said patients.
For those who are interested, the “logic” behind the cuts is based on something called the “sustainable growth rate” formula. Here’s the summary from “Medical News Today”…
“The SGR formula unfairly ties the fees paid for physician services to the performance of the overall economy. Because costs of taking care of an aging population, many of whom have multiple chronic diseases, continue to increase at a faster rate than overall growth in the economy, calculating physician payments using the SGR formula would trigger across-the-board cuts. As a result, Medicare payments for physician services keep decreasing while the cost for doctors to provide care keeps climbing.”
What does this mean for you?
Price fixing is the last resort of the policymaker unable to address a problem intelligently. The unintended consequences will be significant. However, the good news is the potential rebellion by providers will add to the pressure to reform health care.
Jan
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