Lower Medicare reimbursements plague county doctors

SANTA CRUZ -- Many Santa Cruz County primary care doctors refuse to see new Medicare patients, citing the low reimbursement rate they receive from the federal government.

Historically, Medicare has paid primary care doctors working over the hill in Santa Clara County 25 percent more than their counterparts working in Santa Cruz -- for doing exactly the same thing. Santa Clara's rates were adjusted down recently, but they still hover about 16 percent above the rates in Santa Cruz County, according to Dr. Larry deGhetaldi, president of the Santa Cruz division of the nonprofit Palo Alto Medical Foundation.

Adding to the problem, private insurance companies tend to base their reimbursement rates on Medicare's, which means they also reimburse doctors in Santa Cruz significantly less than doctors in Santa Clara.

Why are the rates so different? To find the answer, look back more than 40 years.

In the 1960s, when Medicare was created, Santa Cruz was designated a rural county, as were most counties in the state, including San Diego, Sonoma, Santa Barbara and more than 40 others. Those counties were lumped together and all doctors were paid the same reimbursement rates. Exceptions were made for several urban and suburban counties, including Los Angeles and most of those in the Bay Area.

Over time, although the cost of living in Santa Cruz skyrocketed, the "rural" designation remained, with doctors here continuing to be reimbursed at the same level as those in the Central Valley. A slight rate adjustment in 1997 had little impact on the problem.

As the issue has gained more attention locally, doctors, county officials and Rep. Sam Farr, D-Carmel, have pushed Congress for a fix. At least four times, Farr has written legislation calling for a reimbursement rate change. Whether for political reasons or budgetary concerns, those attempts have failed.

Part of the problem is that, by and large, Medicare reimbursement is a zero-sum game. If doctors in Santa Cruz get paid more, federal rules require that doctors in other counties get less. A change that might sound good to Santa Cruz likely will draw protests from Merced. By taking higher-cost counties like Santa Cruz out of the "rural" average, reimbursement rates to the remaining counties likely would drop.

In 2004, according to deGhetaldi, the California Medical Association advocated a proposal to reimburse Santa Cruz, San Diego and several other counties at urban rates. To compensate for the change, the state's urban counties would take a pay cut so that the rural counties that remained could be protected from reduced reimbursement rates. The federal government rejected the plan, calling it illegal, deGhetaldi said.

Two years ago, Santa Cruz County joined Sonoma, Marin, Monterey, San Luis Obispo, Santa Barbara and San Diego in a lawsuit against the federal Centers for Medicare and Medicaid Services, demanding that reimbursement rates be adjusted to account for a 21st century cost of living. The lawsuit is pending.

In 2007, the U.S. Government Accountability Office published a report supporting Santa Cruz and other California counties' claims that the current geographic boundaries for Medicare reimbursement be revised. Congress has not acted on the report.

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