Center for Studying Health System Change

Despite Earlier Fee Cut, Vast Majority of Physicians Still Welcome Medicare Patients

Earlier Access Decline Levels Off; Nearly 3 in 4 Doctors Accept All Medicare Patients in 2004-05

News Release
Jan. 9, 2006

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON, DC—Despite an earlier payment cut, the proportion of U.S. physicians willing to treat Medicare patients stabilized in 2004-05, with nearly three-quarters reporting their practices were open to all new Medicare patients, according to a national study released today by the Center for Studying Health System Change (HSC).

In 2004-05, 72.9 percent of physicians reported accepting all new Medicare patients, an increase from 71.1 percent in 2000-01, but not statistically different. Physicians’ willingness to treat Medicare patients remained high, despite a 5.4 percent payment cut in 2002 that was not fully offset by smaller increases in subsequent years. Only 3.4 percent of physicians reported that their practices were completely closed to new Medicare patients in 2004-05, also statistically unchanged from 2000-01.

Moreover, the proportion of primary care physicians accepting all new Medicare patients increased significantly from 61.7 percent in 2000-01 to 65.3 percent in 2004-05.

"While concerns about Medicare beneficiary access have focused on physician payment, policy makers should recognize that Medicare fees are only one factor in physician decisions to accept new patients—in other words, Medicare fees don’t exist in a vacuum," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded principally by The Robert Wood Johnson Foundation.

To illustrate this point, the study points out that Medicare physician payment rates rose sharply between 1997 and 2001, while the percentage of physicians accepting all new Medicare patients declined from 74.6 percent in 1996-97 to 71.1 percent in 2000-01. Physician acceptance of all privately insured patients has followed the same general trend as acceptance of Medicare patients, decreasing between 1996-97 and 2000-01, and then increasing in 2004-05.

These trends, in part, may reflect an easing of physician capacity constraints that previously compelled physicians to limit the number of new patients in their practices. For example, physician office visits increased sharply during the late 1990s—about 4 percent annually between 1996 and 2001—but then slowed to about a 1.5 percent annual increase between 2001 and 2003.

"Despite fluctuations in both Medicare physician payment and access during the past 10 years, Medicare beneficiaries’ access to physicians remains high and is on par with physician access for privately insured patients, even though Medicare payment rates average about 20 percent less than private insurance rates," said HSC Senior Researcher Peter J. Cunningham, Ph.D., coauthor of the study along with HSC Health Research Analyst Andrea Staiti and Ginsburg.

Based on HSC’s nationally representative Community Tracking Study Physician Survey, the study’s findings are detailed in a new HSC Tracking Report—Physician Acceptance of New Medicare Patients Stabilizes in 2004-05—available here. The 1996-97 and 2000-01 surveys contain information on about 12,000 physicians, an the 2004-05 survey includes responses from more than 6,600 physicians.

Medicare uses a formula linking annual changes to the payment rate for each unit of service to growth in the number and mix of services physicians provide. If the number and mix of services physicians provide per beneficiary exceeds the established budget, the payment rate is cut to bring spending back within budget.

Following the 5.4 percent payment cut in 2002, physician advocates have repeatedly warned that additional cuts would trigger dramatic drops in physician willingness to treat Medicare patients. In response, Congress repealed a 4.4 percent decrease in 2003, suspended the Medicare physician payment formula—which was expected to cut physician fees for the foreseeable future—and increased physician payments by about 1.5 percent annually in 2003, 2004 and 2005, effectively offsetting most of the 2002 cut.

In recent years, as payment rates essentially remained flat, the volume of physician services provided to Medicare beneficiaries increased rapidly, largely because of increases in the number of tests and procedures. For example, minor procedures, which account for 20 percent of Medicare payments to physicians, increased an average of 6 percent annually between 1999 and 2003, and 18 percent between 2003 and 2004, according to the Medicare Payment Advisory Commission.

Congress in the Deficit Reduction Act of 2005 froze 2006 Medicare physician payments at 2005 levels to avert a scheduled 4.4 percent cut, which was slated because of the continued high growth in the volume of Medicare physician services. A procedural issue delayed final legislative approval, allowing the 4.4 percent cut to occur Jan. 1. Congress is expected to rescind the reduction once it reconvenes.

"Although Medicare beneficiaries’ access to physicians has stabilized, access problems could emerge over time without changes in the Medicare physician payment formula," Ginsburg said. "If the status quo continues, Congress will face a trade-off of uncontrolled physician spending or risking access problems for Medicare beneficiaries."

Other key study findings include:

• The increase in Medicare acceptance among primary care physicians may be related to the increase in Medicare acceptance among physicians with the lowest practice incomes—less than $120,000 a year in 2003. For these physicians, the proportion accepting all new Medicare patients increased from 65.2 percent in 2000-01 to 72.2 percent in 2004-05. Medicare acceptance rates for physicians with higher practice incomes remained steady during this period.
• Among physicians not accepting any new Medicare patients in 2004-05, 69.2 percent cited inadequate reimbursement as a moderately or very important reason for not accepting new Medicare patients. Billing requirements and paperwork associated with Medicare patients were cited by 61 percent of physicians, 44.8 percent mentioned Medicare patients’ high clinical burden, and 40.6 percent reported their practice was too full to accept new patients. About one-fourth of physicians mentioned concerns about an audit as a reason for not accepting new Medicare patients.

As private insurers keep the pressure on physician payment rate growth, continued decreases in the number of privately insured Americans, along with increases in the number of people with Medicaid or who are uninsured, may make it increasingly difficult for physicians to substitute higher paying privately insured patients for Medicare patients.

"Perhaps the greater risk is not that stagnant Medicare payment levels will reduce Medicare beneficiaries’ access to physicians, but that continued financial pressure will compel physicians to limit patients that generate little or no revenue—Medicaid and uninsured patients," Cunningham said.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.