20% of Arizonans have Medicare. As it pays lower rates, they could struggle to find doctors

The Centers for Medicare and Medicaid Services recently released the new fee schedule for Medicare providers — that’s basically the amount that physicians can expect to get reimbursed for treating Medicare patients.

These amounts have seen reductions over the past several years. Natalie Landman, a clinical assistant professor in the Department of Physician Assistant Studies at Northern Arizona University, says that’s impacting the care patients can get.

Landman joined The Show to discuss key takeaways from the new fee schedule.

Natalie Landman

NATALIE LANDMAN: So I actually wanted to, to take a moment and provide a little bit of context before we get into the details if I can. So the first point I want to make is that unlike private payers that have to negotiate payment rates with providers, Medicare does the payment rate setting unilaterally. So it just essentially tells providers this is what we're going to pay, take it or leave it.

The second point I wanted to make is that physician payment rates in Medicare tend to be significantly lower than what providers get from private insurance. The extent of that varies by specialty in geography. But if you look at some of the data, for example, from the Kaiser Family Foundation, private insurance pays on average 143% of Medicare. So there's a big chunk extra that providers get from private pay.

And I think this is where, you know, where we get into the question you were asking about the fee schedule. So Medicare payment rates are not only lower than private pay, but they've actually not kept up with either general inflation or rising practice costs for at least 25 years.

And this is all happening against the backdrop of actually a rising number of Medicare beneficiaries. So we have more demand while we're paying providers less.

MARK BRODIE: That seems like not a great equation.

LANDMAN: No. So if you're a health-care provider and you're trying to stay, you know, financially viable, because you want to take care of your patients, you kind of have, you know, several options.

So one option is you try to limit or titrate the number of Medicare beneficiaries that you see. and in fact, in my line of work, I've actually seen that happen. The other option is that, you know, you start to see more patients per day. So you may have noticed or some of our listeners may have noticed that the length of the appointment has gone down.

And then the third thing you could do is, you know, do more things to patients. And especially if you're seeing them for such a short period of time, you may be worried that you may miss something. So you may want to add additional tests, which may or may not benefit the patient

BRODIE: But will potentially bring in a little bit of extra money to the provider, right?

LANDMAN: Yes. Yes, absolutely. And then your final kind of way to, to get around this issue of payment rates is you try to negotiate higher prices with private insurance, as I mentioned at the beginning, you know, providers can negotiate with private insurance, but they cannot with Medicare. So they will try to negotiate a higher payment rate with private insurance.

So essentially what we're having is the working population like the population that's insured by the private market is subsidizing Medicare both through the Medicare payroll tax as well as through these higher insurance premiums.

BRODIE: Do you think that we will at some point get to a point where Medicare recipients will not be able to find a doctor who will be able and willing to see them?

LANDMAN: Well, again, it depends on the market, but I think it's already happening. Some markets have much lower acceptance rates than others. Arizona for me is particularly concerning because we already have a physician shortage. We have a pretty substantial Medicare population.

So somewhere around 20% of Arizona population is insured through Medicare. And so when you combine a big population that needs the care with already a physician shortage and then cutting the rates further, which could, put providers out of business, like that is not a good set, of circumstances.

BRODIE: Well, so why does the federal government continue to cut the rates? I mean, they must see that there are providers who are opting for tests for patients that maybe aren't medically necessary because they need to bring in extra revenue. And I would imagine that they're aware of the fact that physicians are either not seeing Medicare patients or seeing them for much less time in terms of their appointments.

Why would the federal government not try to find an equilibrium where, you know, the costs are not out of control, but the recipients are getting the care they need and the providers are getting the reimbursement they need?

LANDMAN: So, I think, you know, the overarching notion is trying to control the spending, right? We're trying to control Medicare spending overall. It's, it's because we have, you know, there are a number of reasons why it's growing. One of them is that we're having more beneficiaries coming into the program. Two is we're having a lot of technological advances. So there are more things we can do to people, which is driving some of that.

But also there's a lot of variability that we see in how care is delivered and how spending is done. And if you think in the most basic terms, total spending is a pretty simple equation. It's price times volume, right? So what we pay per service times the volume of services it's done, and the federal government has chosen to focus on the price side of that equation and it's been doing this for 30 years. And yet our overall spending keeps going up.

So you would think they would start paying attention to the other side of the equation. And figure out what's driving the variation in utilization rates. And instead of cutting prices, try to think of how we can reimburse providers differently to address the volume and the quality that's being delivered.

BRODIE: What is your level of optimism that the, the feds and, and Congress will fix this, will get this to a place where recipients are getting the care they need and providers are able to continue to afford to see them?

LANDMAN: So let me ask you a question back, who is the board of directors of Medicare? It's Congress. Any changes are, you know, proposed are obviously subject to lobbying. So that's in one issue, the staffers that write a lot of these regulations, the majority of them are in their 20s and they don't really understand how the system functions. And so I am not unfortunately terribly optimistic about this coming kind of top down.

I think the federal government could learn a lot from what's happening in the private market. So we've had pay for value initiatives, bundle payment, centers of excellence and so on for quite some time in the private sector. And they work really well. And they managed to both save money to employers who get engaged in these programs. For example, Walmart comes to mind. And they provide better quality of care to patients. So it can be done.

BRODIE: So you kind of alluded to this. But I want to ask you more specifically about the, the situation in Arizona, where as you mentioned, there is an ongoing provider shortage of physician shortage and nursing shortage. Just a general health-care provider shortage. We also have a population of, you know, of not an insignificant percentage of the population is eligible for Medicare. 

So relative to other places, is Arizona maybe in a worse situation than, than some other parts of the country? 

LANDMAN: Potentially, yes. I mean, we have, again, we have fewer active practicing physicians than the rest of the country. Getting in to see providers in general is becoming more and more difficult.

So, yeah, it just seems like again, a really bad set up having a growing population that needs the care in a setting where there is already a provider shortage and with potentially more provider shortage coming as a result of these cuts.