ASA president’s letter to the editor on Medicare payment rates for anesthesia services

American Society of Anesthesiologists President Randall M. Clark, M.D., FASA, submitted a letter to the editor to Medscape and Becker’s. The full text in the letter to Medscape can be found below:

Dear Medscape editorial staff,

As the president of the American Society of Anesthesiologists (ASA), I want to address the incorrect and misleading statements in Alicia Ault’s article, “Which Specialties Get the Biggest Markups Over Medicare Rates?” (October 21), primarily the lead sentence, and ask you to publish this letter so your readers will have an accurate understanding of the issue.

What Ms. Ault and the Urban Institute’s study failed to understand or investigate is that Medicare payment rates for anesthesia services are fundamentally broken. They are set arbitrarily by the federal government and are completely disconnected from any remotely market-based rate. 

Moreover, and most relevant to this article, there is no sound basis for them to serve as any type of benchmark or point of comparison for anesthesia payment.

Medicare payment rates for anesthesia services represent less than 33% of average commercial or private insurer rates and are a tiny fraction of the actual cost to provide care. This is far lower than payment rates for other specialties, which average 75 to 80% of commercial rates. 

This differential originated with the badly flawed transition from Medicare’s “usual, customary and reasonable” (UCR) system for payments for anesthesia services to the Resource-Based Relative Value Scale (RBRVS) in 1991.

Since that time, Medicare payment rates have continued to diverge from commercial payment rates. Today, Medicare payment rates for anesthesia services hover around what Medicare paid in 1991.  Only in the world of government rate-setting can that be considered “sustainable.”   

Medicare payment rates for anesthesia services are government-set rates based upon federal government budgetary limitations. Each year, the Centers for Medicare and Medicaid Services (CMS) through the Medicare Physician Fee Schedule (PFS) sets payment rates and policies for Medicare physician services, including anesthesia services. These rates are subject to a range of government cost-control payment mechanisms, including: 

1. Medicare payment freezes - The Medicare Access and CHIP Reauthorization Act (MACRA) six-year freeze: the six-year freeze on physician payment updates in Medicare began in 2020 and will not end until after 2025.  
2. Formulaic cuts - Significant year-to-year modifications and decreases to the anesthesia conversion factor (CF) are tied to overall volume increases in the PFS and do not reflect practice cost increases: In 2021 the anesthesia CF of $21.56 decreased by 2.89% from the previous year and absent Congressional action is expected to decrease by 2.39% in 2022 to $21.04.Over the years the Anesthesia CF has been stagnant. In fact, the 2021 Anesthesia CF is practically the same as the 2010 CF of $21.57. Moreover, these cuts are on top of statutory payment shortfalls such as the 2% Medicare sequestration payment cut.
3. Absence of inflation adjuster in the payment setting process: Annual physician payment updates are not tied to an inflationary adjustment as are other Medicare payment systems. 

The overall impact of these adjustments is that while the Medicare agency is able to control spending, payment rates do not reflect the true costs of providing anesthesia services. As a result, Medicare rates for anesthesiology, which are already significantly lower than private payer market-based payments, are decreasing annually, and this gap is expected to continue to widen.

In contrast to Medicare’s government-set rates, commercial payments for anesthesia services are based upon market-forces and actual negotiations – both antithetical to how Medicare functions.  Commercial rates better represent the costs and value of physician services, including anesthesia services.

As the true cost of anesthesia care delivery continues to rise, Medicare’s arbitrary rate setting system and its inherent weaknesses have failed to support high quality and high value anesthesia care and services. ASA believes Medicare’s flawed rates must be corrected and soon. Failure to address the increasing economic damage to anesthesia practices caused by Medicare will ultimately prove detrimental to patient access to vital high quality anesthesia care.  

Randall M. Clark, M.D., FASA

President

American Society of Anesthesiologists