It all began 48 years ago, when president Lyndon B. Johnson signed off on the nation's first health insurance plan. But while Medicare celebrated a birthday this past July 30, not all doctors were getting a slice of the cake.

In fact, while the Centers for Medicare & Medicaid Services experiments with different payment models and pushes pay-for-performance,  physicians are leaving the federal insurance plan more then ever. It may be time to sit down and work out some of the problems.

A slow start

A national health insurance program was actually the idea of President Harry S. Truman, who began talking about it as far back as 1945. Nothing happened until 1961, when a task force convened by President John F. Kennedy recommended creating an insurance program specifically for those over 65. In 1964, Lyndon Johnson called on Congress to create Medicare, and legislators decide to also include Medicaid (health care services for certain low-income people and others). More than 19 million Americans age 65 and older enrolled in Medicare in the first year (LBJ gave Truman, who was 81 at the signing of the legislation, the first Medicare card).

Medicare's first beneficiaries paid a $40 annual deductible for Part A. The monthly premium for Part B was $3. Today those costs are $1,184 for the annual Part A deductible and a premium of roughly $105 a month for Part B, plus a $147 annual deductible, according to the American Association of Retired Persons.

As we all know in the renal care industry, President Richard M. Nixon extended Medicare eligibility in 1972 to individuals under age 65 who have long-term disabilities or end-stage renal disease. Medicare Advantage was added in 1997, and in 2003, President George W. Bush signed the Medicare Modernization Act, which established the prescription drug benefit Medicare Part D.

Today, nearly 50 million Americans — 15% of the nation's population — depend on Medicare. With increasing life expectancies and more baby boomers turning 65 every day, the number of people in Medicare is expected to hit 100 million by 2030.

Doctors looking for better (paid) pastures

That would put myself knee-deep in Medicare; in 2030, I’ll be 71. The question is: Will my fellow retirees and I be able to find a physician?

Expansion of health coverage under Obamacare (mainly via the Medicaid program) will put pressure on Medicare physicians to see more patients. But a recent Wall Street Journal article headlined “More doctors steer clear of Medicare,” written by Journal staffer Melinda Beck, cited CMS’s own data showing that the number of doctors who opted out of Medicare last year —9,539—was three times the number that dropped out in 2009. While the percentage of physicians opting out is small —there were 685,000 physicians enrolled in Medicare last year—a survey done by the American Academy of Family Physicians suggests the trend may increase. In the survey (n=800), 10% of respondents said they were “nonparticipants” in Medicare, up almost 3% in the last three years. And, 20% of physicians polled said they were not taking new patients, up from 17% in 2010.

For physicians treating Medicare patients — and nephrologists rank high on that list — the issue of payment for services has been a sore spot. The Department of Health and Human Services, which runs the Medicare and Medicaid programs with the help of CMS, currently uses the Sustainable Growth Rate to determine how much Medicare should pay physicians. The SGR is intended to control the growth in expenditures for physicians' services by comparing actual Medicare expenditures to target expenditures. If expenditures exceed the target, the update is reduced (meaning physicians get a pay cut). If expenditures are less than the target, the update is increased and Medicare pays physicians more. That has rarely happened in the SGR’s 16-year history. In most cases, the formula has dictated pay cuts in the 22-27% range. Congress intervenes each year to prevent the cuts form occurring, but the system is unpredictable.

There is a strong movement in Congress to fix the problem. A House bill calls for eliminating the SGR, give Medicare physicians modest increases over the next five years, and then build in an optional pay-for-performance model to help physicians improve their pay. The only problem with the plan is it has no funding source and the cost — estimated at $138 billion over the next 10 years — needs to be covered by cuts elsewhere.

But there are other things that physicians don’t like about Medicare, according to WSJ's Beck. Doctors, particularly the older generation, don’t like being forced to use electronic health records to record their patient diagnoses, and submit patient data for evaluation by Medicare as part of pay-for-performance initiatives.

Indeed, the federal government is looking at new ways to reduce costs and get better quality care at the same time. For the program to survive, they have to: Doubling of membership with high medical risks means you need to find better ways to allocate resources.

The test mule

The ESRD Program is a microcosm of Medicare’s New World approach. Providers experienced the first pay-for-performance model with the Quality Incentive Program (though most would argue there is no real “incentive” to provide better care), entering its third year in January. Nephrologists must work efficiently when prescribing drugs within CMS's relatively new bundled payment system, now facing a 9.4% payment cut. And the new renal-specific Accountable Care Organization demonstration, set to begin in January, takes perhaps the biggest leap of faith: bringing together health care partners to accept total risk of a patient’s well-being with a chronic illness: improving care, reducing morbidity and mortality, and saving money in a “seamless” approach.

Yet CMS isn't making it easy for nephrologists to participate. New language in the latest version of the application for the renal ACO disallows physician practice groups that joint venture with dialysis providers to be sign-on partners in the ESRD Seamless Care Organizations, the groups that will contract with CMS to manage patient care in the demonstration.  While nephrologists in a joint venture agreement with a provider can still be a participant in the ESCO, they cannot be a principal partner. So the provider has to find an independent nephrologist willing to sign on and accept the risk.

Many of the dialysis providers, particularly the small- to mid-sized organizations, set up joint venture agreements with physicians. Part of the perceived benefit of a joint venture agreement is that the nephrologist with a stake in the ownership of the clinic might take on more responsibility for the clinic's outcomes and operations––a characteristic, you would think, might have some positive impact in the new demonstration. The new rule could dissuade many of these smaller providers, who already face a big risk by forming an ESCO, to participate at all. If we end up with another demonstration with one or two big box dialysis providers, as we have seen in ESRD demonstrations in the past, the project will prove nothing.  Early results from some ACO demonstrations show improvement in outcomes, but the programs didn’t all save money. So the renal ACO needs a variety of players to make sure it's a practical model.

Health and Human Services and CMS certainly need to make sure Medicare stays around for another 48 years. It's an important safety net and the public, who finances the program, deserve a strong administrator. But they need to do a better job of partnering with its physicians to stem the tide of those going AWOL. There is still plenty of health care to provide ahead.