Health Care Reform: A Mixed Blessing for Ophthalmology

Short-term revenue gains belie concern over long-term funding and physician autonomy.

By William L. Rich, III, MD, FACS

Forty-five years ago, organized medicine fought the introduction of Medicare with the same ferocity with which it now attacks current health care reform efforts. But if our counterparts in those days could have foreseen what Medicare would do for our profession, they would've welcomed it as a godsend. Ophthalmology was not then the prestigious, wellfunded specialty we enjoy today. In fact, it was deemed a challenging career path, analogous to something like presentday endocrinology, mainly because most of our patients — the elderly — lived below the poverty line, and only 40% possessed health insurance. With Medicare came new patients, higher salaries, research dollars, product development and all the other trappings of success.

Like its predecessor, the current reform effort stands to benefit ophthalmology — at least initially. We're already in line for more than half a billion dollars per year in new revenue, and the 32 million working poor eventually to receive coverage should drive growth in pediatrics, trauma care and academic referral centers.

But unlike Medicare, the long-term feasibility of current plans remains questionable. One can dismiss the more outlandish claims of detractors ("death panels," etc.), but calling this legislation grossly underfunded is demonstrably true; furthermore, cost-saving projections set forth by reform's proponents fall somewhere between laughable and borderline delusion.¹

Below, I'll explain how this affects ophthalmology, plus offer advice on overcoming the inevitable challenges the next five to 10 years will bring.

Higher Fees

Though federal proposals to provide "universal health care coverage" preoccupied most media attention, the more tangible and immediate reforms occurred in the spring of 2009 as changes to Medicare payouts. Here ophthalmology emerged a winner, gaining about $550 million per year in new revenue to be phased in over the next three years, an average 17% increase in surgical procedures, as well as modest gains in other areas. See Table 1 for a few examples.

This was accomplished by overhauling the federal formula used to determine Medicare fees: the Resource Based Relative Value Scale (RBRVS), which has been in place since 1992.

Unlike plans for offering universal health care, these fee increases have been paid for by cutting other areas. There was a strong desire among policymakers to refine the RBRVS in ways that would enhance primary care and chronic care payments, but also to correct huge distortions in the practice expense calculation that favored high-end imaging procedures. As an example, for several years Medicare has compensated MRI and CT imaging technicians for legal liability that these professionals are never exposed to. The Obama administration has altered these professional liability relative value units (RVUs) to more realistic levels.

It is difficult to overstate how the explosive growth in high-end imaging has impacted Medicare spending over the last decade. From 2004 to 2009, new codes for diagnostic services grew 50% faster than codes for surgical services. Though common perception holds an aging population responsible for increased Medicare spending, a close reading of the numbers reveals new technology as the largest driver of Medicare growth. Yet little effort goes into defining how much good such diagnostics do our patients. A common justification points to the need for physicians to practice "defensive medicine" in an environment of legal vulnerability; calls for tort reform fell victim to political intransigence.

Another big reform is the elimination of consultation codes. This move shocked the medical industry, particularly specialists, who receive large payment differentials between visit and consultation codes. But in my opinion we are well rid of consults. No other area of coding has been as contentious and confusing, nor do auditors have a bigger target. Some estimates put the error rate among submitted consultation codes as high as 75%. Moreover, money saved here will be better spent elsewhere: increases to new and established office visits, hospital visits and postoperative office visits. In all, ophthalmology stands to receive an additional $48 million per year via this redistribution, without losing much in return. Only practices earning more than 70% of their revenue from consultation fees will sustain losses.

Unfortunately, in contrast to my prediction in these pages last year,² the deplorable Sustainable Growth Rate (SGR) legislation has not been repealed. This law, passed in 1998 to curb runaway Medicare expenditures, calls for the rate of service/beneficiary expansion to stay the same as or lower than the growth of the GDP, or else pay for overruns with cuts made in following years. It never works. Growth always outpaces the GDP, and every year politicians postpone the mandated cuts, which then become deeper and deeper.

Since no one has even proposed a legislative fix for the clearly dysfunctional SGR law, this ugly burlesque will likely remain an annual sideshow, custom-made for grandstanding politicians who would like nothing better than Medicare cuts to be made on the opposition's watch. I suspect it will continue for three or four years, until policymakers are forced to implement some kind of systemic payment reform.

An Audacious Plan

The passage of health care reform earlier this year marks the most ambitious health legislation since the creation of Medicare and Medicaid. It calls for extending insurance coverage to 32 million uninsured US citizens by 2019, mainly by expanding Medicaid. It imposes new regulations on private insurers, including eliminating pre-existing conditions as a reason for coverage denial; eliminating cumulative lifetime coverage caps, and mandating that parents' plans cover their children up to the age of 26. It also eliminates Medicare deductibles for screening exams, with the aim of encouraging early disease detection. Medicare Advantage plans will also receive significant cuts under the law. But because few ophthalmologists participate in these plans, our exposure there should be limited.

Under the legislation, businesses with more than 50 employees must provide health insurance by 2014 or face a $750 penalty per employee. The vast majority of US citizens must have health insurance by 2014, or else pay a penalty. The penalties start at $95 or 1% of income, whichever is greater; but by 2016 rise to $750 or 2% of income.

Those who fail to qualify for Medicaid may still be eligible for government subsidies to help pay for private insurance. The largest subsidies will be available for individuals and families with incomes between 133% and 400% of the poverty level — or $14,404 to $43,320 annual income for individuals and $29,326 to $88,200 for a family of four.

Private insurance will be sold in new state-based marketplaces, called "exchanges," which begin operation in 2014.

The total cost of all this is expected to be $938 billion over 10 years. The Obama administration has stated that after tax increases and efficiency gains, the reforms will not only pay for themselves but also narrow the federal budget deficit by $143 billion over the next decade. Efficiency gains are to be achieved through enhanced disease prevention, comparative effectiveness research, health care information technology, and mandated experimentation with cost-saving measures such as bundling of care, gain-sharing, implementation of accountable care organizations, and so on.

All laudable ideas, to be sure. But it is difficult to believe that even the plan's architects genuinely believe these strategies can save the vast sums of money they predict. Indeed, apparently anticipating cost overruns, the law calls for the creation of the Independent Medicare Advisory Board (IMAB). Appointed by the executive branch, this independent advisory board will have unprecedented power to cut Medicare spending. Cuts made by the IMAB will be final unless overturned by a large-majority Congressional vote, thus insulating politicians from the kind of potential voter backlash that has kept SGR cuts from becoming reality.

And that's not the worst news. Hospitals, hospice centers and dialysis providers managed to get themselves exempted from the IMAB chopping block until 2020. So four years from now, when pie-in-the-sky health care savings fail to materialize, guess who's first in line for fee cuts? You and me.

Because an average of 30% of our revenue comes from Medicare — and, depending on your subspecialty, perhaps even more — ophthalmology could be badly hurt by the IMAB.

Another ominous creation, the CMS Innovation Center, part of the Centers for Medicare and Medicaid Services, will authorize cost-saving measures like bundling and gain sharing. Using common sense arguments, we in the eye care lobby managed to exclude retinal detachment and vitrectomy from a bundling-payment pilot program sponsored by the Office of Management and Budget, but next time we might not be so lucky. It is impossible to predict what kinds of programs could become mandatory in the future, and how much input physicians will have in their creation.

Winners and Losers

Higher Medicare fees will benefit ophthalmology in the short term, but the expansion of health coverage — while beneficial in many ways — probably won't have the far-reaching positive impact for ophthalmology that Medicare did. Most of our patients are already covered. Those treating ocular trauma, pediatric patients and diabetic retinopathy likely will see increased revenue and volume. The average profile of patients commonly seen at academic medical centers will improve, with fewer falling into the "no pay" category. It is perhaps worth noting that practices in areas with high numbers of undocumented immigrants will receive no relief from this legislation.

The uncertain financing of expanded coverage represents the greatest risk to ophthalmology and to physicians in general. Generally speaking, medicine is not a politically well-organized profession. Of the parties with a stake in these matters — patients, insurers, pharmaceutical companies, hospitals, et al. — physicians have the weakest voice in our nation's capitol right now. Consequently, when resources need slashing, ours tend to top the list. We took the hardest hit during the rise of managed care in the 1990s, and conditions appear ripe for us to take another drubbing this time around.

Viewed altogether, the facts seem predictive of our nation's drifting toward a health care model known as an "allpayer" system. In such a system, insurers join together to negotiate, or the government enforces regulations that set, common payment rules for medical care. This results in a standardization of fees. With a few exceptions, doctors in the same geographic region receive the same fee for the same service, regardless of the payer. Japan, Germany and the Netherlands have all-payer health care.

Right now, our system in the US is anything but allpayer. Some private insurers pay greater than 150% of the Medicare fee for the same service, and Medicaid pays substantially less than Medicare. With fees varying so widely, there will be little incentive for practices to see the millions of new patients covered under Medicaid. The government cannot force you to treat Medicaid patients, and this legislation doesn't change that. What to do? For these plans to succeed, it seems to me that, at some point, Medicaid fees must rise, and private insurer fees must fall, with Medicare fees occupying a sort of middle ground.

In eight or nine years, we could very well end with something akin to a de facto all-payer system. Historically speaking, countries adopting all-payer systems have all seen the same result: downward pressure on physician salaries.

Tough Choices

A generation ago, Medicare arose to meet a need. The elderly demographic we know today is largely a product of the twentieth century, and in a sense the health care system is a victim of its own success. In 1900, average life expectancy was 47, but with the discovery of antibiotics, improved public facilities, better diet, etc., life spans soared, until by the 1960s society had to offer public assistance or condemn millions to illness, suffering and neglect.

Today we face a situation equally untenable. Health care funding cannot continue in its present form. I won't dwell on the widely-known figures: patients' premiums doubling since 2001; Medicare Part A bankrupt by 2019; costs growing three times faster than the rest of the economy; the futility of SGR. And despite rocketing medical expenditures, Americans receive only 55% of recommended care, and 46 million remain uninsured. For all its flaws, this plan or something similar is unavoidable.

Heretofore, physicians and professional societies have not fulfilled their responsibility to take the lead in evaluating new modalities of care. Medical leadership in technology and pharmaceutical assessment is driven by industry more so than physicians. Hence the explosion of new drugs, some with negligible evidence of efficacy, plus enormous growth in non-evidence-based diagnostic testing services. Before government trims the fat, we must reassert the long-standing commitment of medical organizations to the public good. The AAO should take an active role in the evidence-based assessment of new modalities of care, a task achievable within existing frameworks. For example, the Obama stimulus package sets aside $1.1 billion for comparative effectiveness (CE) research; some CE studies advocated by the AAO have already been accepted.

The Academy and subspecialty societies can no longer advocate payment for every drug and device on the market. We must make value judgments grounded in evidence-based assessment. If not, "value blind" cuts in reimbursement and patient access to technology are inevitable. The future will be different. If we don't shape it ourselves, it will be shaped for us. OM

References

1. Marmor T, Oberlander J, White J. The Obama administration's options for health care cost control: hope versus reality. Ann Intern Med 2009;150:485-489.
2. Rich W. The new look of health care reform. Ophthalmology Management. April, 2009.

William L. Rich, III, MD, FACS is Medical Director of Health Policy for the American Academy of Ophthalmology. He also practices general ophthalmology at Northern Virginia Ophthalmology Associates in Falls Church, Va.