NCPA - National Center for Policy Analysis

Doctors in a Quandry Over Medicare Reimbursement Cuts

January 15, 2002

At the behest of Congress, Medicare on Jan. 1 cut reimbursements to doctors who treat Medicare patients by 5.4 percent across the board. That move has left the 90 percent of doctors who treat Medicare patients with some unhappy choices -- which range from refusal to see new Medicare patients to searching for offices in cheaper parts of town and cutting back on staff.

That also spells bad news for some of the more than 39 million seniors insured by Medicare.

  • Medicare reimbursements of all kinds totaled more than $224 billion in 2000 -- up 51 percent since 1993.
  • The economic slowdown has played a role in bringing about the 5.4 percent cut -- since the formula Congress used several years ago for calculating physicians' fees is tied to changes in gross domestic product.
  • Even doctors who don't see many Medicare patients could feel the sting -- because many private health insurers use Medicare rates as a guide to setting their own reimbursement rates.
  • Despite the cut in fees, the overall outlay by Medicare for physicians' fees is expected to rise 1 percent to $41.7 billion in 2002 -- and coverage has been expanded this year to cover several new preventive services.

The American Medical Association contends that the 2002 fee cuts amount to about $7 billion in lost payments to doctors. Looking back over 10 years, the AMA says physicians' payments have risen only an average of 1.1 percent a year since 1991 -- far behind the skyrocketing rise in medical liability insurance and other doctors' costs.

The woes imposed on doctors by having to deal with the Medicare system may be a substantial factor in discouraging entry into the medical profession. Medical school applications are down 26 percent over the past five years.

Source: Barbara Martinez, "Some Doctors Say They May Stop Seeing Medicare Patients After Cuts," Wall Street Journal, January 15, 2002.

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