Learning more about Medicare’s impact on independent practices 

What is Medicare?

Medicare is a federal health insurance program primarily for patients aged 65 or older. The four different parts of Medicare work together to cover comprehensive patient services ranging from hospice care to independent outpatient care to prescription drug coverage. In the past year alone, Medicare helped provide health insurance for over 55 million people, a number that is expected to continue growing rapidly as the American population ages. Thus it is important for providers to have a clear understanding of Medicare and how its anticipated changes will affect their daily practice.

Medicare and Independent Providers

Independent healthcare providers should be particularly knowledgeable about the history and future of Medicare as they are often responsible for navigating complex fee-for-service payment and billing systems on their own. While Medicare increases the patient panel for independent providers, it also asks physicians to do increased paperwork and patient data collection in order to remain compliant under Medicare fraud and abuse laws. Currently the average physician and staff team spends 15.1 hours per physician per week dealing with external quality measures. This translates to an average cost of $40,069 per physician per year. Furthermore, independent providers who lack dedicated staff to help input patient data are even more burdened. Unfortunately, data collection and reporting is expected to increasingly affect independent health care providers disproportionately under Medicare’s changing quality reporting protocols.

Medicare’s History

Medicare was enacted by Congress in 1965 under the Social Security Act as a health care program for all social security beneficiaries 65 years old or older, regardless of their income or medical history. Over the last half-century, as medicine and technology advanced and life expectancies lengthened, the services offered and people covered under Medicare have similarly expanded. For example, Medicare now covers health care for younger people with permanent disabilities, those with end-stage renal disease, and patients with amyotrophic lateral sclerosis (ALS). Furthermore, the anticipated growth in Medicare-qualifying patients (as roughly 75 million Americans who make up the baby boom generation begin retiring) combined with the mass retirement of boomer-age providers will necessitate huge changes to our existing healthcare system.

Medicare Reimbursement

The most recent compensation model for independent healthcare providers providing services to Medicare patients relies on funding from a combination of both government payroll taxes levied on employers and employees and premiums paid for directly by Medicare enrollees.

The payment for provider services were adjusted year to year using a Sustainable Growth Rate (SGR) method which calculates the current year’s reimbursements based off of whether the previous year’s actual expenditures was greater than or less than the targeted expenditures. However, under the SGR method, Congress could also independently update physician reimbursements outside of the yearly schedule (known colloquially as a doc fix).

After 17 such doc fixes between 2003 and 2014 and staggering, cumulative pay cuts for physicians providing Medicare services, the SGR is finally being replaced by a new compensation model, the Medicare Access and CHIP Reauthorization Act (MACRA), also known as the “Quality Payment Program,” set to roll out by 2017. MACRA consists of two separate payment programs: 1) the Merit-Based Incentive Payment System (MIPS) and the Alternative Payment Models (APMs) (see articles 2 and 3 for more in depth analysis.) The aims of MACRA are broadly to reward quality over quantity of patient care provided and to ultimately eliminate the frustrating doc fixes which place enormous pressure on the independent healthcare provider.

In light of these drastically changing Medicare health care systems, the Kaiser Family Foundation recently released survey results of non-pediatric primary care physician’s acceptance of Medicare. Their primary finding is that while the proportion of primary care physicians accepting Medicare (93%) is very similar to those accepting private insurance (94%), there is a somewhat lower percentage of primary care physicians who are accepting new Medicare patients (72%) than those accepting new patients with private insurance (80%).

Looking Forward

Medicare has thus provided a largely necessary form of healthcare for elderly populations who would otherwise have struggled to seek expensive healthcare for chronic and aging diseases. However, its impact on providers and specifically independent providers, have been largely characterized by complicated payment models and reporting documentation. As the Medicare-qualifying patient population is expected to increase from 55 million to 80 million by 2030, it is crucially important for independent health care providers to be up to date and aware of next year’s policy and regulation changes under MACRA.