24% Pay Cut for Medicare Docs in 2014 – How Physicians May Offset It

by | Published on Feb 4, 2014 | Healthcare News

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A recent CNN report has highlighted the 24.4% cut Medicare doctors are going to face in their reimbursements from January 1, 2014. This is much higher than the 2% reduction in 2013. This scheduled cut is determined by targets set under the Sustainable Growth Rate (SGR) formula. The SGR legislation was passed in 1997 to reduce Medicare spending and control cost growth.

SGR formula calculates an amount for a year based on four factors – the estimated percentage change in fees for physicians’ services, the estimated percentage change in the average number of Medicare fee-for-service beneficiaries, the estimated 10-year average annual percentage change in real gross domestic product (GDP) per capita and the estimated percentage change in expenditures due to changes in law or regulations. If Medicare spending increases more than this pre-determined amount, physicians’ Medicare reimbursements would be cut accordingly by next year to make up for the overspending.

However, Congress passes the legislation known as ‘Doc Fix’ regularly to avoid doctors taking the financial burden, and keep the reimbursement levels around the same. Even though it will defer the cuts, it does not give doctors an incentive for providing better value and coordinated care that is critical for preventing long-term growth in healthcare spending. This cut can’t be cancelled once and for all as it would add to deficits and the lawmakers would find it difficult to devise ways to pay for the difference by introducing other cuts or raising taxes. The Congressional Budget Office estimates that it will require around $139 billion over 10 years to permanently override the scheduled reimbursements.

The leaders of the Senate Finance and House Ways and Means committees released a draft proposal in October to repeal the SGR formula, freeze payment rates through 2023 and then introduce set increases with the option for bonuses. The bipartisan proposal would also reform fee-for-service reimbursement system of Medicare in accord with the system that rewards value over volume so that healthcare providers can receive incentives for delivering high-quality and efficient healthcare services.

Physicians May Refuse to Take Medicare Patients

The 24% pay cut will be too hard for physicians as they will have to cut corners due to this and refuse taking Medicare patients. They will lose a considerable number of their patients in this way as both Medicare and Medicaid cover more than 100 million Americans. The paperwork associated with medical billing tasks for Medicare and other insurers is proving quite arduous for many doctors. It also forces them to spend less time with their patients. Doctors who refuse to take Medicare and other health plans do see a fall in the volume of their patients, but they think that there will be others to take their place. Providers in this group list reduced in-house workload and cutting down on the number of staff as their major advantages.

In this scenario, there are other providers that find medical outsourcing a practical option. Among this group are physicians who feel that they can’t just refuse to treat senior citizens on Medicare plans. More and more physicians might drift towards billing companies outside to save money. There are reliable medical billing and coding companies in the United States with reliable offshore and onshore facilities to provide services in keeping with diverse payer requirements. With the right partnering firm, providers can save the time spent on medical billing, and devote more time to their patients as well as increase their patient base.

Julie Clements

Julie Clements, OSI’s Vice President of Operations, brings a diverse background in healthcare staffing and a robust six-year tenure as the Director of Sales and Marketing at a prestigious 4-star resort.

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