Today, Secretary Geithner informed Congress that the United States would hit the debt ceiling limit on Monday, December 31st. The following day, absent successful Congressional intervention, Physicians will incur a twenty-six and half percent (26.5%) reduction in Medicare Reimbursement. And yet one day later on January 2nd, if Congress fails to address the “fiscal cliff”, healthcare providers will incur a two percent (2%) reduction in Medicare payments. The two percent (2%) decrease is projected to save over $11 Billion from the Medicare program in 2013 alone. So while many Americans are focused upon the potential increase in taxes, healthcare providers must evaluate how to address these dramatic pay cuts.
Each year, physicians demand for Congress to correct the Medicare Sustainable Growth Rate (“SGR”) to prevent this significant decrease in Medicare reimbursement. Each year, the physicians have successfully obtained a delay in the implementation of the payment reduction. However, with Congress currently focused upon the potential automatic increase in taxes upon Americans, the physicians are susceptible to the full 26.5% payment reduction going into effect. There is a glimmer of hope that it will take CMS a few weeks to start paying under the new payment model so the physicians will have a few extra weeks to negotiate a SGR fix or additional delay in the implementation of the payment cut. Another glimmer of hope is that both the Republicans and Democrats have expressed their desire to address the SGR implementation. Unfortunately, the timeframe for Congress to address the SGR is unknown. In the meantime, physicians must plan and budget for the payment reduction.
In addition to the physicians, hospital Medicare reimbursement has been continually declining through the reimbursement restructuring created by the Patient Protection and Affordable Care Act (“Healthcare Reform Act”). Immediately following the signing of the Healthcare Reform Act, the hospital market basket reimbursement formulas were modified to reduce hospital payments. In 2012, the productivity measurement was also modified; thus impacting reimbursement. Now, the automatic 2% rate decrease will further reduce hospital reimbursement.
All of these payment reductions are in the midst of the impending changes to third party payer reimbursement models. Specifically, in 2014, many of the insurance reform requirements under the Healthcare Reform Act will be implemented. First, the State Insurance Exchanges will implement a new payer source and the rates of reimbursement are unknown. Second, some states will expand the Medicaid rolls to include hundreds of thousands of new patients, but the payments will be set at Medicaid rates. Still other states will elect not to expand Medicaid rolls and there will be thousands of unemployed or low income patients that may not have any insurance coverage.
Without a solution, healthcare providers are facing a perfect storm as the Healthcare Reform initiatives are implemented amid the dramatic rate reductions. This perfect storm further intensifies as the baby boomer population becomes Medicare eligible. If providers elect to cease participating in Medicare due to the payment reductions, the United States will face a severe shortage of healthcare providers available to care for the Medicare patients. Therefore, the fiscal cliff impacts more than everyone’s tax rate and has far reaching implications for healthcare providers and communities’ access to healthcare services.