American Academy of Ophthalmology Web Site: www.aao.org
Is It Time For Balance Billing?
With Medicare funding in deep trouble and SGR repeal as elusive as ever, the time for greater cost sharing may be at hand.
A look at the pros and cons of balance billing.
With the Dec. 1, 2010, deadline looming, Congress is under the gun to fix or defer yet again a draconian 23 percent reduction in physician payment under Medicare scheduled by the sustainable growth rate (SGR) formula. Repeal of the SGR has been a priority of organized medicine for years, but it hasn’t happened yet. Voicing the frustration all of us feel, Academy member David F. Chang, MD, argues for an alternate political strategy, enabling balance billing.
Ordinarily, EyeNet features clinical topics for our expanded coverage, but this issue was so timely, and of interest to most Academy members, that we assembled some contrasting opinions.
In response to Dr. Chang’s statement, Drs. Michael X. Repka and William L. Rich III, our federal health policy gurus, outline some of the political issues that guide the Academy’s multipronged approach in Washington.
Paul B. Ginsburg, PhD, one of the 10 most powerful people in health care, according to Modern Healthcare, and an Academy public trustee, offers another opinion.
Finally, we solicited an interview with Judith Stein, who heads the Center for Medicare Advocacy, to get a patient/public perspective.
We hope this group of opinions will help energize discussion around this issue. To continue this conversation, please find this article at www.eyenetmagazine.org and use the commenting feature to add your thoughts.
Richard P. Mills, MD, MPH
The Case for Greater Patient-Shared Cost
We are all sick of the annual—and, more recently, monthly—predicted doom, uncertainty and frustration over our Medicare fees caused by the SGR formula. Although the congressional leadership admits that this formula is flawed and unfair, the health care reform bill was passed with no SGR repeal or relief in sight. The prospects for repeal are all the more discouraging because the U.S. government is effectively bankrupt and cannot sustain the current Medicare system, let alone an SGR repeal, without draconian spending cuts.
Thus, I think that organized medicine has been too single-minded in focusing on the SGR. As long as Medicare requires deficit spending, reducing physician payments will always be on the table. Indeed, the health care reform bill created an Independent Payment Advisory Board (IPAB), which will be charged with meeting lower Medicare expenditure targets. The IPAB will be able to arbitrarily cut physician fees without congressional approval.
In a July ASCRS EyeWorld editorial, I suggested that organized medicine reorder its legislative objectives and priorities.1 Specifically, I believe that we should be championing the merits of balance billing with greater patient cost sharing. Throughout my 26-year career, Congress has mandated that I provide the same access and quality of care to seniors as to non-Medicare patients, but at progressively lower, below-market rates. On Dec. 1, SGR cuts mean that I am supposed to do this for a 23 percent lower reimbursement. Although I can understand and accept that Medicare cannot afford to pay me more, I should be allowed to charge this 23 percent shortfall to those patients who still value, want and can afford access to my services. This could be done by raising the limiting charge imposed on nonparticipating MDs relative to the Medicare allowable charge. As we all know, the limiting charge is a federally imposed price control on physician fees, so that at current levels, physicians receive virtually identical reimbursement whether or not they participate.
Viewed from a political standpoint, although patients would pay more due to Medicare payment cuts, physicians would not be receiving a “raise” if the limiting charge was frozen at 2010 rates (which for cataract surgery is barely 20 percent of the inflation-adjusted 1985 Medicare rate). Although beneficiaries would be asked to bear more of the Medicare system shortfall, they would still have the benefit and protection of government-imposed, below-market price limits. In this context, an $800 surgeon fee for cataract surgery would remain an exceptional bargain, even if the Medicare allowable charge dropped to $500.
Although I can understand and accept that Medicare cannot afford to pay me more, I should be allowed to charge this 23 percent shortfall to those patients who still value, want and can afford access to my services.
Most important, if patients were paying more of their bill, they would take a more active role in medical decision-making, such as weighing the necessity of an expensive diagnostic test or an elective procedure. They might be more interested in and dismayed by the hidden costs of defensive medicine. Many health care economists have concluded that greater patient cost sharing would restrain health care spending, and this is also common sense.
Patients could still select a participating MD with the assurance of Medicare-assigned benefits. However, I believe that most MDs who switched to non-PAR status would continue to provide many essential services on an individual case basis to those who could only afford the lower Medicare allowable rate. Instead of resenting mandated cuts amid insinuation of waste or unnecessary services, those physicians would feel good about voluntarily helping financially burdened patients, who, in turn, would appreciate this as an act of generosity instead of something that they are entitled to. As a non-PAR physician, if you believe that EMR, e-prescribing and PQRI reporting won’t benefit your eye patients, then don’t do them. Instead, reallocate the administrative time savings to more chair time for your patients, who, in exchange, would probably gladly accept the 2 percent penalty on their Medicare reimbursement.
A separate but related legislative objective would be to secure the right for seniors to pay their own money for certain discretionary service or device upgrades. Without adding to the federal deficit, the premium IOL channel has provided patients with additional and improved options, preserved industry incentives to advance technology and led to ophthalmologists spending more, rather than less, chair time with cataract patients despite declining Medicare reimbursement.
The political fear that balance billing would open the floodgates to physician exploitation of medically unsophisticated patients appears to have been unfounded. Presbyopia-correcting IOL adoption rates have remained below 6 to 8 percent during the five years since the CMS ruling. The baby boomers expect and want the most advanced technology, which their future health care system already cannot afford. Why should it be illegal therefore to spend your own money to have your cataract surgery performed with a femtosecond laser?
In creating Medicare in 1965, Congress (not physicians or hospitals) made a promise that we would treat all seniors equally while providing the highest level of care for the same low, subsidized cost. Legislators ever since have viewed cutting Medicare benefits to be political suicide. It is time to admit that after 45 years of technological advances, and with the burgeoning size and longevity of the Medicare population, we can no longer afford that promise.
Polls show that the majority of Americans worry about the U.S. government mortgaging the financial future of their children and grandchildren. However, sustaining the runaway entitlement of our current Medicare system requires us to borrow more every year. Although politicians seem to lack the courage to institute greater cost sharing in Medicare, I believe that physicians and organized medicine can educate the public about the merits of this approach compared with the alternatives.
For every current and future Medicare patient who expects and wants options and access to the highest quality care, this would be preferable to having a government-subsidized, bargain-basement insurance plan for seniors in which no doctor is willing to see Medicare patients because the reimbursement is so low. It is better than a 100 percent government-funded single-payer system where our aging baby boomers would soon create an inescapable need to ration services. It would be better for our children and grandchildren if seniors who want and can afford more expensive—but discretionary—technology were allowed to pay for it, rather than to unfairly charge these costs to future generations.
Patients and voters really don’t care whether physician fees are cut. However, they would care if they better understood the negative ramifications for all generations in our society of pretending we can still afford the Medicare promise, when we no longer can.
The Case for Preserving Access
We “celebrated” Medicare’s 45th birthday this past summer. Medicare, especially payment for outpatient physician services in Part B, has done much to promote the development of ophthalmology. However, as Dr. Chang points out, all is not well with sustainable funding for Part B physician payment. Nearly all stakeholders agree that the SGR formula, which is used to update physician fees, is broken.
Indeed, the Academy and organized medicine have championed a replacement of the SGR or a permanent fix of it. In the interim, Dr. Chang is correct that physicians remain under the knife for future fee reductions to sustain the program.
Medicare and many private health care insurers disallow balance billing, the former by law and the latter by contract. Organized medicine, including the Academy, has sought legislative elimination of the limiting charge and enabling of balance billing. Because ophthalmology has one of the highest rates of Medicare physician participation, our goals include continuing the discussion of balance billing and creating other options such as private contracting under Medicare. The current two-year opt-out of Medicare participation is not a true option for specialties with high Medicare volume.
The other half of the balance-billing question has to do with its impact on patients, who are integral to the Academy’s mission. Our patients are under financial pressure. Part B premiums have risen more than 40 percent since 2005. Fewer companies are providing commercial supplemental health insurance to their retirees. Cost-of-living increases for Social Security benefits are frozen, so Part B premiums are currently frozen. And of those beneficiaries with higher incomes, one in four is paying substantial surcharges on his or her premiums. Balance billing would further raise out-of-pocket costs for all beneficiaries, possibly endangering access.
Such a situation makes a political solution in the near future seem impossible. In addition, wealthy taxpayers will be paying an extra 0.9 percent Medicare Tax on their income over $200,000 ($250,000 if filing jointly). Even these wealthier taxpayers will reach a point where they will not accept a Medicare program that allows access to premium services only if they pay for them.
An economic argument is often made that increasing copayments and coinsurance will help restrain utilization. In this scenario, patients would be expected to choose which medical services they want to purchase. The key concern with this argument is that it presumes that patients are as knowledgeable as physicians and, consequently, are able to make appropriate decisions. This could be true for some patients, but the majority must rely on physicians to act in the patients’ best interest. That is a difficult role for physicians to assume.
Beneficiary access may be the key to resolving this political dilemma. Only when access is measurably affected by administrative price controls will there be political will to solve this expensive problem. However, if access is reduced by further increases in beneficiary costs, widespread balance billing does not have a chance. Thus, the Medicare system must first ensure full access to an excellent service at a fair fee. If such access can be achieved, there is the possibility of adding the platinum level of service for beneficiaries who wish to pay more, as with premium IOLs.
The Case Against Balance Billing
Dr. Chang makes many points that I agree with, but I disagree with him about balance billing. He is right about the recklessness of Congress in leaving the SGR in place but then doing fixes every few months. Physicians have good reason to be angry about frequently facing the prospect of a major payment rate cut for a large portion of their patient population. Indeed, at the same time as Congress is doing a disservice to physicians who treat Medicare patients, it is disguising the full extent of the federal government’s horrendous fiscal outlook. Congress has not eliminated the SGR once and for all only because it does not want to own up to its long-term fiscal implications.
I also agree that given the nation’s fiscal problems, those Medicare beneficiaries who are not poor should be paying more for care. Options that Congress should be considering include changing the entitlement from a defined benefit to a defined contribution, increasing premiums and reducing benefits. Payment reforms to encourage better management of care for the chronically ill have a lot of potential.
But I have two substantial concerns about permitting unlimited balance billing:
An issue of market power. The first, which many physicians will not support, is that the limit on balance billing enables the Medicare program to use its market power for the benefit of the taxpayers and beneficiaries. Basically, Medicare can pay lower rates under these rules without imposing a large burden on its beneficiaries. Public insurers in other developed countries use their market power in this way as well.
At a time of such budget stringency, why would government want to give up this power? Of course, this power has limits in that lower rates would reduce beneficiary access. Indeed, it is fears of loss of beneficiary access—more than physicians’ advocacy—that has prevented SGR cuts from going into effect.
Is this Medicare or Medicaid? The other concern is whether unlimited balance billing will make the Medicare program resemble Medicaid for many beneficiaries. Balance billing might lead to a situation in which only a minority of physicians participate (that is, agree in advance not to balance bill) and a large portion of Medicare beneficiaries are unable to afford other physicians.
Although Dr. Chang suggests charity for patients less able to afford balance bills, the world has changed. Today, many physicians practice in large organizations that are not set up to make charitable decisions. Moreover, middle-class people with insurance do not relish the prospect of needing to seek charity from physicians, especially those with whom they do not have a relationship—and today, that describes most of the physicians they consult. Indeed, Dr. Chang is advocating that physicians be given a license to be price-discriminating monopolists, charging each patient as high a balance bill as she can afford!
Given Dr. Chang’s comments on taking a pass on EMRs, e-prescribing and PQRI, I wonder if we should interpret his editorial as pining for the “good old days” when physicians could practice in silos and not be accountable for the care they deliver.
The Case for an Equitable Approach
Dr. Chang’s call for greater patient cost sharing through unlimited balance billing would endanger people with Medicare and erode support for the Medicare program.
Balance billing, with no cap, threatens to create a barrier to care for Medicare beneficiaries with limited incomes. According to the Kaiser Family Foundation, older individuals, on average, spend over 12 percent of income on health care, compared with only 2 percent for younger individuals. Yet many older people have limited ability to generate extra income to absorb rising medical bills.
Unfortunately, as out-of-pocket expenses grow, studies show that Medicare beneficiaries forgo health care services. Our clients are among those who underutilize care when they can’t make ends meet. As it happens, eye care treatment is perceived by many as elective—until there’s an urgent problem.
Aside from creating a barrier to health care, unlimited balance billing could accelerate the current trend toward an increasingly income-based Medicare system that demands greater cost sharing from higher-income individuals. Already, people of means are complaining about rising out-of-pocket costs, and some are opting to exit Medicare and enter private plans. Medicare is in danger of losing the support of these well-off beneficiaries, who also tend to vote in large numbers.
Add unlimited balance billing to the mix, at a time when Medicare is moving more toward income-based payments, and we risk creating a two-tiered program. Those doctors who decide to balance bill will end up serving patients with deep pockets. Doctors who decide to forgo or strictly limit balance billing will be left caring for lower-income patients. So while income-based payments and balance billing may sound like good ideas, they will divide the Medicare population and subvert the universal spirit and intent of the original program.
Unlimited balance billing has been tried before, with unfortunate consequences. In the 1980s, doctors were allowed to balance bill with no limits. Some charged a great deal to make up from beneficiaries what they found lacking in Medicare reimbursement. Those physicians treated patients who could afford their services. Patients who could not afford their services went elsewhere. But the system became too expensive for most beneficiaries and added to overall health care costs, so in 1991, Congress acted to limit the amount physicians can bill.
For most of its 45 years, Medicare has succeeded, in part because of its relatively simple and uniform design. The program offered a comprehensive benefit package while being user-friendly. And it served both higher- and lower-income people. But over the past decade, Medicare has become increasingly fragmented, privatized and more complex. Dr. Chang’s proposal continues down that path.
It’s time to seek a more equitable and effective approach for all involved. Let’s work together to ensure uniform, comprehensive benefits and out-of-pocket costs for beneficiaries and appropriate payment for providers.
Balance billing is an idea whose time came and went—for good reason. Let’s not bring it back.