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Commentary |
1 Department of Diagnostic Radiology and Public Health, Yale University, 333 Cedar St., New Haven, CT 06510-3206.
Address correspondence to H. P. Forman
(HealthPolicy{at}arrs.org).
Keywords: benefits • Medicare • practice of radiology • reimbursement • taxes
Just before penning this column, the President released his FY 2009 budget. Pundits and stakeholders alike immediately announced the budget plan to be dead-on-arrival, at least with respect to the declared Medicare cuts. Despite this, it is worth mentioning these proposals and what they might ultimately mean for our practices.
Medicare payment reductions totaling $178 billion over 10 years were announced. If enacted, these would be the most dramatic reductions since the Balanced Budget Act (BBA) of 1997. BBA 1997, as you recall, had a devastating effect on hospitals and, particularly, those of us who have hospital-based imaging practices. The largest of the proposed cuts will hit the inpatient hospital reimbursement scheme, but large cuts are also planned for outpatient services, graduate medical education (residency and fellowship training programs), capital support to hospitals, and disproportionate share (DSH) of impoverished populations.
You might ask why the President would be proposing a draconian budget in his last year in office. Certainly, the President is not going to win any awards from the public for decimating the program that he has otherwise spoken of in glowing terms.
The President is required, under the Medicare Modernization Act (MMA) of 2003, to forward to Congress a proposal for dealing with the "45%" trigger. This trigger requires the President and Congress to maintain the general tax fund contribution at 45% or less of the total Medicare budget. With the enactment of the Part D benefit and its implementation 2 years ago, this threshold will be passed in 2013 and then continue to increase. The MMA 2003 legislation requires Congress to act 5 years before the 45% figure is actually passed, and that means 2008 is an important year. The President's budget is merely a setup to this legislated response.
If the budget is dead-on-arrival but the 45% trigger is mandated, where will Congress and the President go with Medicare financing? There are no easy or quick fixes available, and all the fixes will affect our pocketbooks in some way or another. There are, and have always been, three means to manage the Medicare "problem": reduce benefits, increase taxes, or increase cost sharing for current Medicare beneficiaries. None of these proposals is being touted by any current presidential candidate (for good reason).
There are many potential ways to reduce current or future benefits. None of them are particularly appealing. With legislated change, Medicare could follow the lead of other developed nations and only pay for services that are cost-effective. This would be a dramatic change for the Medicare program and would be met with very stiff resistance. As an alternative, Medicare could pay fixed sums for various services and ask for greater cost sharing when new technologies cost more. This, too, is not at all appealing, either politically or socially. Increasing the use of managed care as a means to reduce benefits is also possible (and is actually happening), but there is little evidence that Medicare Advantage (as the current managed Medicare program is called) reduces costs or benefits.
Increasing cost sharing might take several forms, including the already established means-testing of the Part B premium. In 2007, wealthier Medicare beneficiaries began paying higher premiums than all other beneficiaries. The President has already proposed extending the definition of "wealthier" down to lower income levels. Other options available to the Congress include increases in copayments, deductibles, or coinsurance. In each case, it is considered unlikely that any elected official would support these other options because they would disproportionately affect the least financially well-off and the most vulnerable among our sickest Medicare beneficiaries.
By default, increasing taxes is the solution to the funding crisis, either explicitly or implicitly. Whenever Part D or Part B benefit costs grow, the funds flow directly from general tax revenue, as mandated by Congress when these programs were enacted. Although the Medicare Trust Fund is considered a separate budgeted program (for Medicare Part A—primarily hospital and inpatient services), all other Medicare programs are funded from the general revenue of the U.S. Government. As they grow, they must either be matched by increasing budget deficits or increasing taxes. In the long run, taxes must rise to match our budget expenditures. In addition, the Medicare Trust Fund will run out of money in the latter part of the next decade, requiring separate financing relief, either through a new dedicated stream of government revenue or from an increase in the Medicare payroll tax (currently 2.9%, split equally between the employee and the employer). Although the Medicare Part A program would require legislation to correct its deficit, the Part B and D programs are already funded. That funding, however, immediately affects the 45% trigger—any additional government funding will raise this percent over the trigger. So, although one piece of legislation says that Medicare (parts B and D, at least) is appropriately funded, another (the 45% trigger) says it is not! How does this affect our practices? In the long run, there will likely be some combination of these proposals, making our patients more susceptible to the increasing costs of medical imaging. In addition, the Medicare program will continue to make efforts at reducing our reimbursement (as a short-term alternative to increasing cost-sharing on the elderly). Independent of your political affiliation, reduction in the Medicare program's growth is a likely outcome and a reality to be reckoned with. In the next few months (perhaps before you are reading this), Congress must address the proposed 10 plus percent reduction in all Medicare Part B reimbursements because these reimbursements are slated to be implemented on July 1, 2008. As part of the legislated fix to this cut, expect other reimbursements to be sliced. Will radiology take a heavy hit, as with the Deficit Reduction Act of 2005? Hopefully not! In the spirit of the boy scouts, however, it is better to be prepared!
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