Doctors Brace for Heavy Medicare Cuts

With the irresolution on Capital Hill and increasing likelihood of going over the fiscal cliff, doctors should prepare not only for the implementation of Obamacare and associated taxes and paperwork but also for substantial Medicare cuts.

Quoting a doctor requesting anonymity, 

…one other thing about the fiscal cliff that I just learned is that effective January 1st Medicare will pay doctors 27% less. They usually pass some sort of a “doctor fix” law because people don’t want that (doctors would turn away Medicare patients and angry seniors would storm the capitol). But that duty will likely fall to the new congress to pass yet another temporary doctor fix. And if they don’t fix it then insurance companies will also happily follow suit and cut their payments to doctors by 27%. Also the Obamacare trend of paying bad hospitals less and good hospitals more will begin on January 1st as well, but that’s unavoidable at this point.

For doctor groups, repealing the sustainable growth rate is something of a holy grail: This is the formula that determines how much Medicare providers get paid, by tethering their salaries to overall growth in the economy. This formula has, for a decade now, always fallen short of keeping doctor salaries stable. This year, if we stuck to what the sustainable growth rate says doctors should be paid, physicians would end up taking a 26.5 percent pay cut.

That has meant that, year after year, Congress has had to pass a “doc-fix:” A short term funding patch to make up the difference between what the formula says doctors should get paid, and what it would take to keep their salaries stable. It’s become somewhat of a tradition, where Congress scrapes together small cuts from other programs to pay for the fix.

If this “doc-fix” does not happen early in 2013, insurance companies will follow suit, causing all doctor reimbursement will drop 27%. At the same time, the medical device tax begins for all medical supplies to help fund Obamacare. 

Currently, the average doctor salary is less than $200,000 (varied by specialty), while medical school loans are an average of $156,000 principal debt in 2009 (latest data). At the same time, doctors typically have fewer years to save towards retirement accounts, due to the average 9-10 year length of post-undergraduate training.

All this may result in doctors working longer hours to make up the difference in reimbursement. This could also result in the end of many private practices and the expansion of large medical groups such as Kaiser Permanente.