Medicare Compliance & Reimbursement

Is Medicare's influence on private payers what's really bugging docs? Despite threats from physicians over the past two years that they'll stop seeing Medicare patients due to low reimbursement, some recent reports suggest that it may not be Medicare rates so much as the extent to which private payers increasingly echo those rates in their own reimbursement schemes that is the real thorn in physicians' sides.

"Although total practitioner services spending for the privately insured has risen substantially, fees (payment per service) of private insurers have been stable in recent years," according to the Maryland Health Care Commission's Practitioner Utilization report on 2000 and 2001 that was issued in March. "Practitioner fees paid by Maryland private insurers were essentially unchanged from 1999 to 2000, and appear to have declined slightly, on average, from 2000 to 2001. The Maryland experience appears consistent with national trends."

So, with private-payer reimbursements stagnating, and Medicare physician fees rising by 5 percent in 2001 - an increase that was a partial cause of the formula-driven Medicare physician payment cuts that were scheduled for 2002 and 2003 - in Maryland in 2001 "private rates averaged 2 percent below Medicare's rates."

By contrast, in 2000, private-payer "fees averaged 4 to 5 percent above Medicare's rates. The change is due mainly to a 5 percent increase in Medicare's rates in 2001, combined with a modest 2 percent decline in reported private rates from 2000 to 2001."

In 2001, "the estimated total payment per RVU for non-[health maintenance organization] plans was 1 percent below the Medicare level, and for HMO plans was 4 percent below the Medicare level," says the report.

While private-insurer rates and their relationship to Medicare payment vary around the country, the Maryland data reflects a trend also noted in the Medicare Payment Advisory Commission's March report. "The difference between Medicare and average private rates is smaller now than it was in the mid-1990s," say MedPAC, whose report is based on analysis by Dyckman and Associates, LLC, and Christopher Hogan of Direct Research, LLC, who also prepared the Maryland report.

MedPAC attributes the overall creep of Medicare and private-pay rates to more comparable levels to "shifts in private-plan enrollment from higher-paying indemnity plans to lower-paying [preferred provider organizations] and HMOs" since the mid-1990s. Medicare's rates were about 66 percent of private rates in 1994, but rose to 83 percent by 2001.

MedPAC analysts also note that, while Medicare's scheduled 2002 and 2003 payment reductions "increased pressure" on private plans to raise their rates in response, no plans surveyed "say that the reductions have had a strong or direct impact on their decisions about payment rates."

That private plans are increasingly content to allow their own payment rates to mirror Medicare reimbursements, even when those are low enough to make doctors squeal, also is suggested by recent American Medical Association data, in which 86 percent of managed-care plans said they followed the lead of Medicare's Resource Based Relative Value Scale for physician payments in 2001, compared to only 69 percent who did so in 1998.

While Medicare payments are similar on average to private-insurer payments, there are significant differences among services, says the Maryland study. "Private rates are lower than Medicare rates for evaluation and management services such as office visits, but typically exceed Medicare rates for other services. On net, the average rates are close to Medicare's rates only because evaluation and management services constitute such a large fraction of all privately paid care."

For non-E&M services, private-insurer rates in Maryland are "somewhat to significantly above the Medicare level," says the analysis.

Similar E&M differentials are apparent in new payment data released by the trade publication Physicians Practice based on its survey of 339 doctors around the country. Doctors in the relatively small multispecialty sample were surveyed only about payment for office visits, since that's the only service that's offered by all specialties, according to senior editor Pamela Moore.

The findings for those services are likely to surprise many, who increasingly think of treating Medicare patients "as pro bono work," says Moore. "A level three new-patient office visit ... earned, on average, $81 to $90 from commercial payers in 2002, according to our respondents," according to Physicians Practice. "Meanwhile, Medicare paid $135." For a complex visit with an established patients, commercial insurers paid between $101 and $110, and Medicare paid $181.

Medicare paid more on average for office visits with both specialists and primary-care doctors, according to the survey. Primary-care physicians may get as much as 75 to 80 percent of their revenue from office visits, while specialists may only garner around 25 to 30 percent from that source, according to Moore.

While the payment differential in favor of Medicare may surprise some, it simply shows that Medicare's payment schedule is continuing to have one of its intended effects, according to Hogan. When the fee schedule was originally established, federal officials wanted to guard against the particular access difficulties about which beneficiaries primarily complained. As Hogan explains: "When beneficiaries said, 'I can't get a doctor to see me,' they were talking about office visits, not cataract surgery."