Medicare: A Game Primary Care Doctors Cannot Win

Over the past decade or so, Medicare caused the downfall of primary care. It is now almost impossible for a primary care doctor to open a solo practice and accept Medicare (and Medicaid).

So the smart doctor asks, “Why play a game where the rules are stacked against me? Why play a game where I cannot win?”

An educated person won’t expect to make money by playing the slot machine.

An educated person won’t expect to live longer by playing Russian roulette.

An educated doctor won’t expect to financially survive by wasting an exorbitant amount of time on paperwork, for peanuts.

It wasn’t always this case. But when you have a bankrupt country, and a reimbursement system that is dictated by politics (rather than by need), the common person is the one who suffers.

What Is Medicare?

When you reach 65 years old (or when you’re disabled), you would qualify for the federal insurance program — Medicare. As of 2012, there are 50.7 million people on the program (which is more than 16% of the US population). Basically, a whole lotta people are on this program.

But even more people pay into the program. Everyone who legally work (meaning those who gets a W-2 or a 1099-Misc) pays 1.5% – 4% of their earnings as Medicare tax. Because so many people contribute, there is a substantial amount of money in the federal insurance pot. There is potential for the right players to get rich … and for the wrong players to lose out.

Primary care doctors are the wrong players. And this is why (according to the National Policy Analysis)  …

  1. Medicare reimbursements are set by politics, than by need.
  2. It takes way too much paperwork to get paid.

1. How Medicare Reimbursements Are Set

Payments for a particular medical service or procedure is not based on importance, but rather based on politics. The groups that can band together for their own good win at the expense of the outcasts.

In this unfortunate scenario, primary care is among the outcasts …

To ensure that physicians would wield influence over how they were paid by Medicare, the AMA established the Relative Value Scale Update Committee (RUC) in 1991. It is an advisory board composed of representatives from most of the physician specialty societies, such as American Academy of Family Physicians, American Association of Neurological Surgeons, the American College of Cardiology, and so on.

The RUC meets three times annually, and in most years it makes recommendations to CMS on new procedures and services that Medicare should pay for and on ones that need to be revised. Under federal law, every five years CMS must conduct a comprehensive review of RVUs to identify which procedures and services are overvalued and which are undervalued. The RUC plays a large role in the five-year review as well. Overall, RUC wields significant influence over what Medicare pays for procedures and services. CMS has accepted somewhere between 88 and 94 percent of RUC recommendations on RVUs since the early 1990s.

However, the composition of the RUC results in a payment system that is biased against primary-care physicians. There are 31 members on the RUC, 25 of whom are appointed by the various physician specialty societies. Yet only five are primary-care physicians; the other 20 are specialists.

Under federal law, revisions to RVUs cannot result in Medicare payments to physicians that add more than an additional $20 million to the annual Medicare budget. This means physicians are divvying up a fixed Medicare pie. Of course, doling out the pie in Washington is seldom done cooperatively. This makes the RBRVS a political pork barrel for physicians and their interest groups, and the RUC is the battleground. Like most political fights in Washington, it produces winners and losers.

Dr. Neil Brooks, who served on the RUC as a family physician, claims that the process is “highly political, with battle lines and alliances drawn between specialties. Usually, the battle lines were drawn between primary-care physicians and everyone else. The specialists often team up to support each others’ proposed increases in Work RVUs.” As an article in Kaiser Health News noted, “Since specialties are all fighting over slices of the Medicare physician payment pie, and many specialists make the bulk of their profits on procedures, primary care doctors say those specialists avoid increasing the values of the … codes that are primary care’s bread and butter.”

However, the amounts set by the committee do not only impact Medicare reimbursements. They impact those set by private insurance companies, as well. Companies like Aetna, HUMANA, UnitedHealthcare, and many others look to Medicare to determine the reimbursements. Since primary care services are reimbursed less federally, they are also reimbursed less privately.

On top of that, Medicare reimbursements are subject to change based on the whims of a third party — Congress, who have absolutely no “skin in the game.” Every year, Congress threatens to lower reimbursements to doctors under the Sustainable Growth Rate (SGR). Doctors threatens to reject Medicare patients. Congress relents and increases reimbursements by 1% instead. (The increase is still less than the rate of inflation. So in the end, doctors still get shafted.)

In addition, what happens if Congress do lower reimbursements, when you have a practice full of Medicare patients? Does that mean you have to close your practice and declare bankruptcy, due to no fault of your own? How is that fair?

The SGR also has the pernicious effect of creating uncertainty among physicians. Congress usually waits until right before the SGR cut takes effect before suspending it. On a few occasions Congress has actually suspended it shortly after it took effect. Not knowing if they will face reductions in their Medicare payments year after year has been a major factor in causing some physicians to restrict their acceptance of Medicare. The 2010 AMA survey found that of the 17 percent of physicians who were limiting the number of Medicare patients in their practice, over three-quarters listed the “ongoing threat of future payment cuts makes Medicare an unreliable payer” as a reason.

That is the main reason Dr. Slatosky stopped taking new Medicare patients.

“It was in 2007, when the cut was going to be about 10 percent,” he said. “Then Congress came in at the last second and stopped it. But the news stories noted that Congress would have to come in and suspend it again in six months. I pretty much saw the writing on the wall that this was going to be a perpetual mess. You knew Congress was not going to fix it permanently.”

Dr. Slatosky decided he wasn’t going to keep expanding the number of Medicare patients in his practice while also worrying that every year or so Medicare might cut the amount it paid him to treat them. It was not a decision he made easily.

“It bothered me a lot because now there were going to be Medicare patients who would have the hassle of trying to find another physician in this rural area,” he said. “But in the end, it was better to have a physician here seeing some of the Medicare patients in the area than me losing my business and having no physician here at all.”

2. Too Much Paperwork

Not only are reimbursements meager and uncertain, there are two main hoops you need to jump through to get paid.

First, Medicare must approve of the service or procedure. If it is not already pre-approved, you’ll have to fill out the necessary paperwork (a huge, huge hassle) …

On his way back he explains, “I lose about $10, maybe $15, per patient visit on Medicare. I’m doing better now that I’ve stopped taking new Medicare patients. If I had a lot of new Medicare patients, I’d be in big trouble.”

Once at his office, he starts in on his least favorite part of the job: paperwork.

“I can spend four to five hours a week on paperwork that I don’t get paid for,” he complains. He explains that he particularly dislikes paperwork involving Medicare:

“The biggest problem with Medicare, anytime someone needs anything, the paperwork to get it done can be astronomical. Let’s say you have a patient who needs a nebulizer for their cardio-pulmonary obstructive disorder. They run between $60 and $120. To get that, you have to fill out this big form with all these questions, most of which have nothing to do with a nebulizer. So you have to pick out which questions are pertinent. Then you have to send it to a durable medical equipment supplier who then gets the patient a machine. It can be a seven to ten day turn around. Well, if the person is struggling with acute asthma or COPD, he doesn’t have seven to ten days. So we purchased six nebulizers and we keep them in the office. That way if someone needs a nebulizer long term, they borrow one of ours until they get one of their own.”

But even paperwork required for more routine work adds to his costs. Dr. Slatosky estimates that for every 10 to 15 minutes he spends with a patient, he’ll spend a quarter to one-third of that on documentation and coding. He also has an employee who ensures that he has done the coding correctly in order to get paid. And it adds up, since he will have to do that for every patient he sees who has Medicare or private insurance.

Second, after you have completed the visited, you must bill Medicare. However, if you make even one tiny mistake in your billing (which could be something as small as a typo), the government will reject your bill outright.

That is why an average primary care doctor spends over $70,000 just to deal with Medicare and insurance companies …

For small, one-to-two physician practices, the annual cost of dealing with health insurers was greater for primary-care physicians than medical or surgical specialists. Small primary-care practices spent an average of $72,675 interacting with health insurers. Medical specialists spent $70,788 and surgical specialists spent $61,187. The clerical staff, which accounted for the bulk of the hours spent on claims and billing, cost small primary-care practices an average of $31,666 annually, while they cost medical specialists $27,595 and surgical specialists $27,977. The data strongly suggests that primary-care practices could save substantial time and money by reducing if not eliminating billing expenses.

Billing entails a complicated system of coding. There are two types of codes that physicians must use for billing Medicare, private insurance, or any other insurance provider. The first is Current Procedural Terminology (CPT) codes. These are five digit codes that denote the service or procedure that a physician is providing. For example, the CPT code for a Level I visit with a new patient is 99201, while for a colonoscopy it is 45378.

The second is International Classification of Disease (ICD) codes. These are a system of diagnosis codes that explain to the insurance provider exactly what the patient is being treated for. Depending on the diagnosis, ICD codes are from three to five digits in length. So, if a physician sees a new patient and he diagnoses him with anemia, he would add the ICD code 280 next to the CPT code 99201. If it is a more serious type of anemia, like Plummer-Vision Syndrome, the ICD code used would be 280.8. At present there are about 18,000 ICD codes.

Billing is a bigger expense for primary-care physicians than specialists because primary-care physicians have to use a far wider array of ICD codes.

But billing will only get more complex and onerous. On October 1, 2014, the new (and vastly more complex) ICD-10 will replace ICD-9. There will be 68,000 existing codes, as opposed to the 13,000.

In the future, when ICD-11 comes out, do you think there will be more codes or less? Well, does bureaucracy get bigger or smaller? Does increased bureaucracy make things more or less complex? I would bet that, in the future, there would be even more codes, which will make billing even more expensive.

Hooray for even more paperwork!

Why Play a Game You Cannot Win?

As you can see, the healthcare system is very unfavorable to primary care doctors. So why participate when the odds are stacked against you?

If you don’t like to gamble …

If you don’t like to play the Russian roulette …

Then you wouldn’t like Medicare either.

So what should you do instead?

Since it is almost impossible to have a solo practice that accepts only Medicare (and Medicaid), there are only two logical steps you can take:

  1. Become an employee and let someone else handle all the billing. Let someone else worry about profitability. However, if your employer wants to make a profit off of you, you’ll have to see a huge amount of patients. With only 24 hours in a day, you’ll have to spend less time with each patient. Will you be satisfied giving substandard, impersonal medical care? Will you be ok with having no control over your own schedule?
  2. Or … become your own boss and reject Medicare. Heck, reject all insurance and let the market decide what you’re worth. If you get paid more per visit, you can spend more time with each patient. Sure, you may not see as many patients, but the care you give will be damn good. Are you willing to be responsible for everything?

It’s your choice. Quantity or quality. Lack of control or control.

Attention! Do you want to make more money as a doctor? Do you want more freedom? Are you sick of all the useless, time-wasting paperwork? Do you wanna learn how to set up and run a profitable practice that only takes cash, from someone who has “been there and done that?” If yes, check out My Cash-Based Practice: Essential Knowledge for Creating a Successful Private-Pay Physical Therapy Practice — the best book I have found on starting and running a cash practice.

At the very least, check out the book review.

This article is part of the Money in Medicine series. Click on the link if you want all the money-making secrets available to doctors.

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