Financing the Future of Healthcare; Impact Analyses
CollaborateMD Blog
by Madeline Angela Meyer,
Senior Healthcare Consultant

He said, she said; even the Actuaries really can’t say!

How will the future of healthcare services be financed in the United States in 2013 and beyond? The medical care delivery cost equation has never been more challenging and ambiguous in its projections. Even the actuaries at the Centers for Medicare and Medicaid (CMS) cannot agree on what the future healthcare expenditures may be and how they will be paid for. In a May, 18, 2012 memorandum from the CMS Office of the Actuary, projections were presented to rectify the previous 2012 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, which they felt was unrealistic. The memo stated that “Medicare’s actual future costs are highly uncertain and are likely to exceed those shown by the current-law projections in the annual report (CMS, 2012).”

On the flip side the actuaries stated that under the current-law projections, physician expenditures were unrealistically high and would most likely be less than projected. In other words, total healthcare cost projections have been grossly understated, and physician and hospital cost projections have been overstated. In particular, the purpose of the memo was to present a rationale on how to minimize the impact to physicians and hospitals in regard to the fee cuts effective January 1, 2013. See: Projected Medicare Expenditures

As of January 1, 2013, the cuts for Medicare Part B physician non-facility fees will decrease by -27% and non-facility fees will decrease by -28% based on the published CMS physician fee schedule files. See the comparative analysis prepared using the National 2012 Physicians Fees against the CMS 2013 Physician Fees (unadjusted for geographic location). See: Medicare Part B 2012/2013 Comparative Fee Analysis (Source: CMS Data, Model, Meyer, 2012).

2013 Fee Schedule Impact Analyses

Every medical provider and professional wants to quantify how the changes under the healthcare reforms and fiscal adjustments will impact them. These measurements may be done by downloading utilization and fee schedule reports from your medical billing system and using the primary source files of the Medicare Part B Physician Fee Schedule to perform similar analysis such as the following illustration impact model provided. What this model doesn't show are the many "other" factors that need to be taken into consideration in the impact analysis when you perform one that is specific to your medical practice. These will be discussed next. See: Example National Medicare Part B 2013/2012 Fee Schedule, Utilization Impact Analysis (Source: CMS Data, Model, Meyer, 2012).

Other Fee Schedule Considerations

There are many physicians and professional organizations that have documented that the CMS fee schedules are not accurate. However, relative value units (RVUs) are still the most quantitative data that we have to set practice fees by, quantify utilization, productivity, revenue and costs. The physicians and professional organizations continue to present errors in the Resource Based Relative Value Scale (RBRVS) even in 2012, which is 20 years after its implementation. Other example issues affecting physician reimbursement in 2013 and beyond are:

• Inaccurate Practice Expense Relative Value Units
• Misvalued Codes Under the Physician Fee Schedule
• Devalued Global Surgical Packages
• Inappropriate Multiple Procedure Payment Reduction
• Inaccurate Malpractice RVUs (reviewed only every 5 years)
• Geographic Practice Cost Indices (CMS does not include proposed GPCI changes for 2013 and will be updating them in 2014)

Impact modeling should be performed each time there is a change in the CMS primary fee schedule files using the provider specific Geographic Price Cost Indices (GPCI's), and the current rules of coding and billing, e.g., the National Correction Coding Initiatives (NCCI). When errors are found, providers may submit a written request to the American Medical Association's CPT Editorial Panel to either fix and/or add a procedure code. See: CPT® Coding Change Request Instructions For errors or adding a code related to HCPCS Level II, Durable Medical Equipment, Orthotics, Prosthetics and Supplies (DMEPOS), which are updated quarterly, providers may submit requests to CMS. See: HCPCS Level II Coding Process & Criteria

Financing the Future of Healthcare

Right about now, you may feel like the future financing of healthcare is coming off the backs of healthcare providers. This is understandable, but there are other factors at play that are contributing to paying for future costs, but the forecast does remains cloudy and here is why.

The Accountable Care Act, 2010 (ACA) will provide insurance access to an estimated 30 million more Americans, it provides more mandatory paid prevention services, it prohibits denial for pre-existing conditions, it removes lifetime caps on insurance coverage payments, and it prohibits the cancellation of active insurance policies. So, who else is picking up the tab?

There are no cookie cutter answers, but there are many reform scenarios being implemented that may help with the growing costs, e.g.,

• Accountable Care Organizations (ACA) (premiums and taxes)
• The Theory of Eliminating Cost Shifting (leveling the playing fields)
• Accountable Care Organizations (ACO) and Medicare Shared Savings Program
• Pay-for-Performance Incentives and Quality Improvements
• Physician Compare and in Physician Quality Reporting System (PQRS)
• ACA creates medical loss ratios whereby a fixed portion (80-85%) of insurance companies’ revenues must go towards medical care for beneficiaries.
• Medicare Recovery Audit Contractors (RACS)recoupments
• Hospital, Physician and other Provider Fee Cuts
• Hospital Value-Based Purchasing
• Hospital Quality Improvement (HQI)
• Physician Value-Based Payment Modifier
• and other healthcare reform initiatives being implemented through 2015.


Health services delivery and reimbursement have never been more complex. If it is a challenge for the actuaries within the DHHS and CMS to provide accurate predictions of the future financing of healthcare, it is reasonable to say that it will continue to be a challenging feat for our providers in their attempts to quantify and predict the impact of the many reform changes to their practices in this very dynamic, often unpredictable era of healthcare reform.


CMS. (2012). National Physician Fee Schedule and Relative Value Files. Read More

CMS. (2012). Fact Sheets. Details for: CMS Issues Outpatient Policy and Payment Changes. Read More

Federal Register. (2012) Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule, DME Face-to-Face Encounters, Elimination of the Requirement for Termination of Non-Random Prepayment Complex Medical Review and Other Revisions to Part B for CY 2013. Centers for Medicare & Medicaid Services on 11/16/2012. Read More

Shatto , John D. Clemens, M. Kent. (2012). Projected Medicare Expenditures under Illustrative Scenarios with Alternative Payment Updates to Medicare Providers. CMS. May 18, 2012. Read More